Information Disclosure Quality of Listed Companies on the Cost of Equity Capital of Research
|Keywords||Quality of information disclosure Equity financing costs Information disclosure assessment rating Earnings aggressiveness Earnings smoothness|
Quality of information disclosure on the cost of equity financing is one of the priority field of the study areas of the capital market, abroad theoretical and empirical study commonly show that the quality of information disclosure’s improvement can reduce the information asymmetry between managers and investors and the information asymmetry between investors, thereby reducing the investor’s forecast risk and improve the stock liquidity and expected cash flow, thereby reducing the cost of equity financing. Early in the development of China’s stock market, stocks as a new thing, its supply scale is limited, in this case, investors ignored the request for information disclosure, the relationship between the quality of information disclosure and the cost of equity financing is not very clear. With the continuous development and improvement of China’s stock market, the environment of listed companies in China has undergone tremendous changes. In the background of this change, Hoping the company to provide more timely, more transparent, more reliable information has become the urgent demand of investors. Meanwhile, the raising of company’s information disclosure level is good to follow a reasonable law of value for stock market, reduce the adverse effects from information asymmetry, and also good to the healthy development of securities markets. Therefore, information disclosure are gaining more importance in China, its impact on the cost of equity financing can draw the same conclusion should be explored.Firstly, based on efficient market theory, principal agent theory and asymmetric information theory explain the quality of information disclosure on the cost of equity financing,theoretical analysis of the relationship from the stock liquidity, forecast risk, expected cash flows and introduce our country’s present situation of information disclosure, then introduce the concepts and calculation methods of the equity financing costs and quality of information disclosure. In this paper, using three-stage discounted residual income model to calculate the cost of equity financing, using the Shenzhen Stock Exchange A share listed company data from 2003-2007, in the control of beta, book market value ratio, return on assets, asset growth, financial leverage, the company size, the number of analysts, the proportion of tradable shares, the nature of actual controller, two dummy variables of year and industry, using multiple regression analysis of empirical research methods analyse information disclosure quality on cost of equity financing of listed companies in China. On the basis of the description of variables and sample test, we can conclude that the higher the quality of information disclosure, the lower the cost of equity financing; otherwise the lower of information disclosure quality the higher of equity financing cost,the the negative correlation between the two.Finally, based on the conclusions, a number of policy recommendations proposed in this paper: listed companies should improve the quality of information disclosure to reduce the cost of equity financing. The independent and impartial body should establish the authority of evaluation system for information disclosure, through improving mandatory disclosure requirements, strengthen penaltieson listed companies which disclosed of false information, enable investors to obtain the true level of information disclosure, thus enhancing the efficiency of securities markets.