Research On The Impact Of Social Trust On The Equity Corporate Financing Cost

In China's capital market,companies have a strong preference for equity financing,and Myers' theory of financing priority order fails.For the study of this peculiar phenomenon,it is necessary to further explore the causes of the differences in equity financing costs of enterprises and analyze the influencing factors of equity financing costs.Equity financing cost is an important part of the capital cost of an enterprise.Its level not only affects the capital allocation and financing methods of an enterprise,but also affects corporate investment as a basis for decision-making.From this point of view,it is important to analyze which factors will affect the cost of equity financing.The embeddedness theory holds that the enterprise is embedded in the social network in which it is located.Therefore,the financing behavior of an enterprise is affected by both formal and informal institutions.Researching the existing literature found that most of them are based on the impact of formal systems,such as laws,on the cost of equity financing of enterprises,and there are few studies on informal systems such as social trust.But recent studies on the role of formal institutions have shown that formal institutions are not the only prerequisite for economic prosperity,and the construction of informal institutions is equally important.As an important informal system,social trust has gradually paid more attention to the role of macro-micro economy,In view of this,this paper reviews the embedded theory and social capital theory,and studies the impact of social trust on the cost of equity financing of enterprises.Investigate the role of social trust in the cost of corporate equity financing,whether the nature of corporate ownership and formal systems have an alternative or complementary effect on social trust and equity financing,and how social trust affects the cost of equity financing.This paper uses the data of all A-share listed companies in Shanghai and Shenzhen in China from 2014 to 2017 to measure equity financing costs based on the OJN model.The research sample is a 2014-2017 A-share listed company on the main board of Shenzhen and Shanghai.Method,empirical analysis of the relationship between social trust and the cost of equity financing.And summarize the research conclusions of this article,and put forward targeted recommendations.Specifically,the main research contents and conclusions of this article are as follows:(1)Social trust has a significant negative impact on the cost of equity financing of enterprises,that is,increasing the level of regional social trust can effectively reduce the cost of equity financing of enterprises.(2)Compared with state-owned enterprises,competition between non-state-owned enterprises is more intense.At the same time,in order to get the opportunity to repeat the game many times,non-state-owned enterprises pay more attention to the construction of trust,so that social trust has a more significant negative impact on the equity financing costs of non-state-owned listed companies.(3)Social trust can only play a role in reducing the cost of equity financing only in areas with a well-developed formal system.That is,the formal system increases the cost of dishonesty and makes social trust more effective in reducing the cost of equity financing.This conclusion helps Chinese enterprises to strengthen local formal system construction in a long-term,continuous,and proactive manner,and to form a good market environment.