USE MODEL, OJ (OHISON AND JUETTNER-NAUROTH) TO ESTIMATE THE COST OF UNDERLYING CAPITAL AND ENHANCE PREDICTABILITY IN ACCOUNTING INFORMATION

Abstract

The research aims to estimate the cost of capital implied by using (Ohison and Juettner-Nauroth, OJ) model, which is based on actual data of a group of banks whose shares that are listed on the Iraq Stock Exchange .In view  of a set of banking-related factors, which previous foreign studies have proven their ability to influence the implicit cost of capital, and enhancing the predictive power of accounting information, and introducing the concept of legal cost and cost of capital. The research was based on the premise that the use of the (OJ) model contributes to determining the implicit cost of capital through which it can enhance the predictive power of accounting information. In order to examine the model for estimating the implicit cost of capital, the Iraq Stock Exchange was chosen as the research sample, where (10) banks have been selected for a period of (11) years from 2006 to 2016, and the model was tested in terms of the extent of the model’s ability to enhance predictive power. For the accounting information, as the results of the study proved that it is possible to apply the methods of calculating the cost of capital implicit in the Iraq Stock Exchange and the (OJ) model which used one of the models that have the ability to measure the implicit cost of capital and enhance the predictive power of accounting information in the Iraqi market, the market will achieve a qualitative leap between global markets in the event that the implicit capital cost index is added to the Iraqi Stock Exchange