The Empirical Research On The Influence Of Disclosure Quality On The Cost Of Equity Capital

Information disclosure is a very important institutional arrangement to solve the information asymmetry problem in the capital market. In recent years, as China's security market becoming better-developed and investors becoming increasingly rational, disclosure quality has been widely concerned. As an economic consequence of information disclosure, the change of the cost of equity capital is of great importance for listed companies financing or refinancing. Considering the current reality that the disclosure quality of listed company needs to be improved further more and China's securities market is in rapid development, it is of theoretical and practical significance to do research on the influence of disclosure quality on the cost of equity capital .On the basis of summarizing and learning from relevant literature at home and abroad, this thesis analyses the necessity and importance of information disclosure.It discusses the way disclosure quality influence the cost of equity capital from the point of shares liquidity,investors'predicting risk and potential disclosure cost. And then it chooses the overall disclosure quality and the earnings disclosure quality to measure disclosure quality. After controlling for the effects of other important factors, this thesis chooses A-share listed companies in Shenzhen Stock Exchange during the 2005-2008 periods that meet the refinancing conditions as research samples,to regress to the cost of equity. The empirical results show that:The relationship between overall disclosure quality and the cost of equity capital displays U–style. When the overall disclosure quality is worse than good level, improving disclosure quality can reduce the cost of equity capital. But the marginal utility becomes less and less; when the overall disclosure quality reaches good level, improving disclosure quality will raise the cost of equity capital. Earnings disclosure quality and the cost of equity capital is negatively correlated. The earnings more radical, smoother, the higher the cost of equity capital will be. At the same time,the nearer the time of disclosure quality is, the greater the influence on the cost of equity capital will be. As regards to this phenomenon, there is no difference between the overall disclosure quality and the earnings disclosure quality.Thus,we should further more perfect the disclosure laws and regulations, strengthen the internal governance of listed companies, improve the audit quality of CPA and enhance the quality education for investors, to improve disclosure quality of listed companies, so as to decrease their financing or refinancing cost.