Information Disclosure, Investor Confidence And The Cost Of Equity Capital

Nowadays, Chinese financial market develops so fast. Information plays a veryimportant role in capital market. For the existence of information symmetry, the efficiencyof market gets damaged. In sake of protecting investors, increase investors’ confidence andsaving transaction cost, enterprises have to make their information systems moretransparency. Investor’s sentiment significantly affects the financial market which isimproving and getting better every day. I want to answer the following questions in thispaper. Can the enterprises gain investor’s confident through enhancing the quality ofinformation disclosure? Can the enhancement of investors’ confidence lead to the decreaseof the cost of capital? Can the companies improve their competence in financial points ofviews through these ways? This paper will do practice research to prove the questionstouched on above by using data of companies listed in Shenzhen Main Board, Small andMedium Enterprise Board and ChiNext.This paper focuses on analysis the relationship of information disclosure, investor’sconfidence and the cost of capital. Micro-evaluation method is used in assessing investor’ssentiment, while the evaluation method of cost of capital is PEG model. The empiricalresult proves that the higher the quality of information disclosure is, the higher theinvestor’s confidence is. Meanwhile, the cost of capital declines. So, the quality ofinformation disclosure will affect the cost of capital through enhancing the degree ofinvestors’ confidence. The author wanted to provide a solution to support the managementof investors’ confidence and therefore stabilize the stock price of listed companies. From amacro perspective, the cleverer we deal with investors’ confidence, the better we can runthe whole financial market healthy. The shareholders of financial market will be benefitfrom it.