The Impacts Of Environmental Information Disclosure Of Listed Company On Cost Of Equity Capital

According to the stock liquidity hypothesis and forecast risk hypothesis, listed companies improve the level of information disclosure can reduce the information asymmetry between investors and managers and estimation risks of investors, enhance the liquidity of stocks, thus reduce the cost of equity capital. As part of information disclosure, as long as the environmental information disclosure can be used to forecast earnings and cash flow of companies, the mechanism of information disclosure affecting the cost of equity capital is also applicable to the environmental information. On this basis, this paper examines the relationship between the listed company environmental information disclosure and the cost of equity capital, as well as how the environmental information disclosure of listed companies affect the cost of equity capital.Firstly, on the basis of the stock liquidity hypothesis and forecast risk hypothesis, this paper analyses the causes of environmental information disclosure of listed companies and the impacts of environmental information disclosure on cost of equity capital. Secondly, based on the sample of 302 listed companies in 2014, this paper quantifies the environmental information disclosure with Environmental Disclosure Index, and estimates the cost of equity capital with PEG model, after controlling β and scale of company and related variables, examines the relationship between the listed companies environmental information disclosure and the cost of equity capital. Finally, this paper measures the liquidity of stock with turnover rate and uses standard deviation of expected returns measure the estimation risks of investors, after controlling related variables, this paper uses mediation effect testing method to exam how the environmental information disclosure of listed companies affect the cost of equity capital from two aspects which are the liquidity of stock and estimation risks of investors. The results show that environmental information can significantly reduce the cost of equity capital, and companies improve the level of environmental information disclosure can reduce investors’ risk prediction further reducing the cost of equity capital.