A Research In The Effect Of The Listed Companies Disclosure Quality On The Cost Of Equity Capital

An efficient capital market has three characteristics:fair,just and open. As a foundation of market "open" characteristics, it has become core spot of modern economic development theory. Empirical research of disclosure has increasingly become the focus of the modern corporate finance research, the relationship between disclosure and the cost of equity capital has become hot research in recent years. High level of information disclosure can help to obtain equity financing from capital markets, which have a major impact on the cost of capital.Research on relationship between disclosure and cost of capital is the focus of the modern finacial theory, but it has not yet formed a complete and comprehensive theoretical system, and experience has not yet conclusive test. Foreign theory concluded that the quality of disclosure can reduce the cost of equity in risk and liquidity angle. Domestic scholars pay much attention to the economic consequences of information disclosure, but domestic literature in the area is really small, due to different sampling,alternative indicators, the conclusions have not yet agreed.In the past ten years, China's capital market exists that listed companies does not disclosure information timely.Many companies are forced by outside pressure of public opinion and regulatory disclosure of information, few company disclosed information in the real effective based on its own strategic needs.These problems led to investors indebted in disclose information, the effect of information disclosure are affected, then weakened the power companies to disclose information. But at the same time, China's capital market is in development phase, in recent years information disclosure of listed companies increasingly standardized, investor demand is gradually increasing. In this case, whether improving information disclosure can help reduce the cost of equity? Among the different characters companies, whether the relationship between the two is different? The researches on the questions will have the vital significance on arousing companies to enhance disclosure on their own initiative awareness, reducing the financing cost, maintain fairness and justice in the capital market.In this article, normative research and empirical research are united, qualitative and quantitative research are united, we study why and how the listed companies disclosure quality make effect on the cost of equity capital from a theoretical point of view. And, we take 605 stock companies from 2007 to 2009 on the motherboard in Shenzhen stock market as examples. Then we discuss whether the disclosure quality is helpful in reducing the cost of equity capital of listed companies under our special stock market environment? Among the different characters companies, whether the relationship between the disclosure quality and cost of capital is the same? at last, the author attempts to provide policy recommendations which can improve the information disclosure system and enhance the level of disclosure of information disclosure.This paper is divided into five chapters:Chapter one is an Introduction.Chapter one:IntroductionThe chapter introduced the background and significance of this article, and then review literature at home and abroad. Foreign theory concluded that the quality of disclosure can reduce the cost of equity in risk and liquidity side.But some scholar put forward different views that improve the quality of information disclosure may lead to higher costs, domestic literature in the area is really small,but most believe that there exists a negative correlation between the two, China's disclosure of listed companies were experiencing a improved the process of change with the growing concern on the information disclosureChapter two:The theory between information quality and the cost of capital First defines the concept of quality of information disclosure, then summarized the current several measurement methods of quality of information disclosure. Then explained the nature of the cost of capital, analyzed and compared several method of cost of capital in the Western We found that each model has a prerequisite for their use, the paper selected OJN economic growth model to measure the cost of capital. In the last we explained the relationship between the cost of capital in transmission from the law of capital market information, asymmetric information theory, signal transmission theory. This chapter is the theoretical basis of the paper. Chapter three: Overall design of empirical researchOn the basis of previous theoretical analysis, we drawing Zeng Ying, Lu Zheng fei teacher's point of view, put forward first hypothesis of this article: the quality of information disclosure and the cost of equity financing is negatively correlated. On this basis, we analysis that in our emerging capital market, due to the presence of agency costs, shareholders and small investors demand a higher rate of return to safeguard their own interests, thereby enhancing the cost of capital. The different nature of property rights may have different effects on agency costs, on the one hand state-owned enterprises are put into the Government's regulatory framework, the daily administrative operations in the complex monitoring network; on the other hand, the state-owned enterprises are facing "shareholder exploitation" and "Management plunder",investors will pay more attention to information disclosure to reduce risk. So we draw second assumption: the relationship between the quality of information disclosure and the cost of capital is more significant in state-controlled listed companies.Chapter four: Empirical Results and analysisThis chapter lists the empirical data sources and sample selection process, then process sample data by descriptive statistics and regression analysis to test.Chapter Five:Conclusions and policy recommendationsDraw relevant conclusions according to the research. And propose recommendations to improve the quality of information disclosureThe paper selects 605 samples in 2007-2009 as the research object in the Shenzhen Stock, use multiple linear regression method to study the relationship between information disclosure quality and the cost of capital. We chose information disclosure of listed companies which issued by Shenzhen Stock to measure, and assign the four grades 4,3,2,1. In addition, we choose OJN model to calculate the marginal listed equity costs. Then after controlling beta, firm size, financial risk, profitability, market and operational risks and other factors,we use 605 samples to regress by EVIEWS, we found that: 1:on the whole, there is a significant negative correlation between information disclosure quality and the cost of capital 2 In this paper, we divides the sample companies into state-owned enterprises and non state-owned legal to explore the significant differences between the two. The results showed that state-owned shares nature of the business relationship between the two is more significant.The contribution of this article is:1, we used economic growth model(OJN) to estimate the cost of capital. At present, the majority of the literature use GLS model to measure the cost of capital.2.We found that there is negative relationship between information disclosure and the marginal cost of capital, the relationship in the state-owned enterprises is more significant.Limitations of the article is:Our model started from the microscopic basis, only taking corporate governance and financial indicators into account, but not considered macro-environment factors; study is limited to the Shenzhen Stock Exchange A share listed companies which have equity financing qualified companies, the empirical results can not be extended to all listed companies.