Journal of Resource Management and Decision Engineering 5 Serial Number 16 2026 05 01 The Impact of Accrual-Based Earnings Management on the Cost of Equity Capital of Companies Listed on the Tehran Stock Exchange with Control for Firm Size, Financial Leverage, and Growth Opportunities The Impact of Accrual-Based Earnings Management on the Cost of Equity Capital of Companies Listed on the Tehran Stock Exchange with Control for Firm Size, Financial Leverage, and Growth Opportunities 1 12 EN Journal Article 2025 12 10 <p>The objective of this study was to investigate the effect of accrual-based discretionary earnings management on the cost of equity capital of companies listed on the Tehran Stock Exchange while controlling for firm size, financial leverage, and growth opportunities. This applied quantitative study employed an explanatory–correlational design using panel data analysis. The statistical population consisted of companies listed on the Tehran Stock Exchange, from which 142 firms were selected through systematic elimination sampling based on data availability, fiscal year uniformity, continuous market presence, and exclusion of financial intermediaries. The study period covered ten fiscal years from 2014 to 2023, generating 1,420 firm–year observations. Financial data were collected from audited financial statements and official market databases. Accrual-based earnings management was measured using discretionary accruals estimated through the Modified Jones Model. The cost of equity capital was calculated using a market-based implied cost of capital approach. Control variables included firm size measured by the natural logarithm of total assets, financial leverage measured as total liabilities to total assets ratio, and growth opportunities proxied by the market-to-book ratio. Data were analyzed using panel regression techniques following diagnostic tests including the Chow and Hausman tests to determine the appropriate estimation model. Panel regression results indicated a positive and statistically significant relationship between discretionary accruals and the cost of equity capital, suggesting that higher levels of accrual-based earnings management increase shareholders’ required returns. Firm size exhibited a significant negative association with the cost of equity capital, implying that larger firms experience lower financing costs. Financial leverage showed a positive and significant effect, indicating that higher debt levels increase perceived risk and equity financing costs. Growth opportunities were also positively related to the cost of equity capital, reflecting greater uncertainty associated with future performance expectations. The overall regression model demonstrated strong explanatory power and statistical significance. The findings demonstrate that accrual-based earnings management increases information risk and leads investors to demand higher expected returns, while firm size mitigates financing costs and leverage and growth prospects intensify equity risk perceptions. The study highlights the critical role of financial reporting quality in capital market efficiency and emphasizes the importance of transparent accounting practices for reducing equity financing costs in emerging markets.</p> https://journalrmde.com/index.php/jrmde/article/download/269/390