An Empirical Study On Disclousure Quality Effect On The Cost Of Equity Capital Of GEM Listed Firms

With the rapid growth of Chinese economy and the continuing improvement of information disclosure of the Chinese stock market, the importance of the information disclosure increasingly grows. Information disclosure becomes an important bridge of the capital markets and the listed firms, the significant instrument of alleviating adverse selection, moral hazard and asymmetric information issues, impact the capital market efficiency and social efficiency of resource allocation. Therefore, improving the quality of information disclosure is essential for Chinese capital market’s healthy development. The theoretical models and empirical research of the Information disclosure is also increasingly becoming the modern theory of corporate finance focus areas. And the core issue is the relationship between information disclosure and the cost of equity financing. Many domestic and foreign scholars have proved that it exists some relationship between the quality of information disclosure and equity financing cost of a significant relationship. In this paper, on the basis of previous studies, mainly research the information disclosure quality of GEM listed companies’ and the cost of equity. We hope to explore methods of reducing the cost of equity is GEM listed firms through relevant research.Firstly, We reviewed and summarized the domestic and foreign research literatures, then elaborated the concepts of the quality of information disclosure and equity financing costs, then excavated the influence mechanism of the information disclosure of listed companies and cost of equity financing action, on these basis we use the empirical research methods from the direct and indirect angles to explore the impact on the relationship between the two variables. By the means of the analysis, we draw the following conclusions:First, from the direct research perspective, raising GEM quality of information disclosure of listed companies help to reduce cost of equity financing; Meanwhile, the delay of information transfer, the GEM listed companies equity financing costs not only by the quality of information disclosure during the year, but also by the quality of the previous year, the impact of information disclosure, and affected a greater degree. Second, indirect angle perspective, quality of information disclosure and stock turnover variables showed a significant negative correlation between the angle combination of direct research companies with higher stock turnover lower cost of equity financing conclusion, indirect instructions to improve quality of information disclosure can reduce the cost of equity financing.The main contribution of this paper lies from using the data of the GEM listed firms plating on Shenzhen Stock Exchange from 2010 to 2012 as samples from two perspective research to improve the quality of information disclosure for reducing the cost of equity financing role. In the light of the empirical results, combining with Chinese actual situation of companies listed on GEM, we advance relevant policies and recommendations from the four aspects of government departments, agencies, institutions and individual investors and the company inside.