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Abstract
The main objectives of this research are to examine the direct association between the voluntary IFRS adoption and cost of capital and to examine the indirect effect of earning quality on the voluntary IFRS adoption and cost of capital in Egyptian and european firms. In order to achieve these objectives, the data are collected from the financial statements of 102 Egyptian and European firms for the period of 2006 till 2015. The 102 firms are classified into 51 firms adopting Egyptian accounting standards in Egypt and the other 51 firms adopting IFRS in Europe. The results showed that there is a significant negative association between voluntary IFRS adoption and cost of capital. Cost of capital reduced in firms that adopted EAS more than firms that adopted IFRS. Also, earnings quality is not considered to be a mediator because it does not affect the association of voluntary IFRS adoption and cost of capital. However, there is a significant positive association between voluntary adoptions of IFRS and accrual quality. Also, there is a significant negative association between absolute abnormal accruals and accruals quality as earnings quality measurements and cost of capital. Moreover, there is a positive association between earning smoothness and the cost of capital