The Research Of Effect On The Cost Of Equity Capital By Disclosure Of Internal Control

The exposure of international listed companies'financial fraud cases, took a great damage to the confidence of investors on capital market and brought the attention and discussion of investors and regulators on internal control system. From SOX Act to "Basic norms of internal control", regulatory authorities around the world are trying their best to improve the internal control system and regulate the information disclosure of internal control. However, with the increasing of instability in capital markets, whether the regulating of the information disclosure and the encouraging of more and more listed companies to conduct internal control audit can improve information quality from listed companies effectively and reduce the cost of companies'equity capital and the investors'required return on investment? In recent years, the demonstration of the economic consequences, which is the core of this article has been a discussion focus of rugulatory authorities and experts.Firstly, this article reviews the relevant literature and gives a clear explanation about some concepts.Then, The article describe the disclosure situation of internal control information and relevant causes of Chinese listed companies. Also,on the base of market effective theory, asymmetric information theory and signaling theory, this article analyze the mechanism of the effect of disclosure of internal control information on the cost of equity capital.Secondly, in the empirical part,this article use the data of listed firms from 2008 to 2009 on the motherboard in Shanghai stock market as sample and use the PEG ratio method to estimate the cost of equity capital that is the dependent variable. Also, internal control self-assessment report and internal control attestation report are used as the independent variables and the company size, asset-liability ratio,operating loss and state-controlled conditions are selected as control variables. From the study,We found that unaudited internal control information and the cost of equity capital has a negatively correlated,but the correlation is not significant; audited internal control information and the cost of equity capital has a significant negative correlation.This conclusion implies that,compared to unaudited internal control information,audited internal control information has a stronger signal effect and can be recognized by the capital market so as to have a more stabal capital pricing.Finally, on the above research, this article proposed some policy recommendations on regulatory authority and listed companies. As to study of this subject,author also put forward some prospect.The article's innovation is that the author construct a multiple a regression model to test the effect on the cost of equity capital by disclosure of internal control information.Also,the explore of reducing the cost of equity capital by improving the disclosure level of internal control enrich relevant research ideas on lifting enterprise value.Then, in accordance with the status and causes of information disclosure,the author raise some recommendation to improve the information disclosure system of internal control.