Hamid Salehi - Department of Accounting, College of Economics and Social Science, Shiraz Branch, Islamic AzadUniversity, Shiraz, Iran

This study evaluated relationship between information asymmetry and cost of equity capital,through moderating of stock liquidity, in petroleum corporations of Tehran Stock Exchange(TSE). In this research bid ask spread is used as a proxy to measure information asymmetry.Also, liquidity of shares was regarded as a moderating variable. In order to analyze theresearch hypotheses, this research examined data of 41 Petroleum Corporations in TehranStock Exchange from 2008 to 2014 by employing combined data regression analysis method.For determining proper methods for hypotheses testing, this research performed Chow test toselect pooled data method via panel data. The model number one is pooling data with randomeffect by using Haussmann test whereas the model number two is panel data. The findingsrevealed a significantly negative relationship between information asymmetry and liquidity ofshares and a significantly negative relationship between liquidity of shares and petroleumcorporations of Tehran Stock Exchange equity cost of capital. Accordingly, with regard tomoderating impact of share liquidity, there is a significantly positive relationship betweeninformation asymmetry and petroleum corporations of Tehran Stock Exchange equity cost ofcapital.

information asymmetry, capital costs, liquidity, equity cost of capital