Research on the Relationship between Disclosure Quality of Listed Smes and the Cost of Equity Capital
|School||Hubei University of Technology|
|Keywords||information disclosure quality cost of equity predict risk stock liquidity|
SMEs play an important role in promoting economic growth, social progress andtechnological development，the financing of SMEs is becoming increasingly serious,domestic and foreign scholars have done a lot of research to solve this problem. On thebasis of previous research, this paper focuses on the relationship between the cost ofequity capital of Listed SMEs and its information disclosure quality, hope to find outsome methods to reduce the cost of equity capital of SMEs.With China’s rapid economic development and constantly improve of stock market,the disclosure of information is becoming increasingly important. Informationdisclosure helps to reduce the adverse selection and moral hazard, help to promoting theefficient allocation of resources. First, this paper describes the criteria for theclassification and evaluation methods of information disclosure. Based on theasymmetric information theory, efficient market theory, agency theory, we study therelationship between information disclosure quality and cost of equity financing; Thisarticle pointed out that the disclosure of information reduce the cost of equity financing,mainly through alleviate the degree of information asymmetry between companies andinvestors, reduce the risk of investors predict and improve stock liquidity. Chinesescholars have conducted extensive research, but most studies concentrated on directresearch the impact of information disclosure quality to the cost of equity financing,lack of the indirect perspective research. Our study samples are the2008-2010data of552small and medium-sized listed companies. These companies listed on small boardof the Shenzhen Stock Exchange. We study the impact of disclosure of informationquality on the cost of equity capital based on both direct and indirect point of view.From the direct point of the study results, the cost of equity financing that calculateby OJN model failed to pass the reliability test,it seems that the greater the risk thesmaller the cost of equity financing. The middle value is the critical success factor toOJN model, and its calculation is very complicated, the middle value used in this paperis draw on foreign study results, This value may be inconsistent with the actual situationof China’s capital market.Indirect point of view of empirical research, we use Beta, standard deviation ofearnings and turnover as the three variables which reflecting the equity risk, the qualityof information disclosure shows a significant negative correlation with these three riskvariables. Firstly, the sample is divided into four groups based on informationdisclosure rating results，compared the level of equity risk, qualitatively reveals that thehigh level of information disclosure corresponds to the high stock liquidity and low risk.Second, after multiple regression analysis, it was found that every increase of one levelfor the quality of information disclosure, the three variables that reflect the equity risk were significantly reduced, this indirectly reveals that improve the quality ofinformation disclosure can reduce the cost of equity financing. This article also foundthat small and medium-sized enterprises also show the scale effects.Based on empirical findings, combined with the actual situation of China’scapital market, this paper suggest some relevant recommendations from the perspectiveof small and medium-sized listed companies, investors and regulators. Bycomprehensively analysis, we think that we should standardize information disclosure,and improve the quality of information disclosure is an effective way to alleviate SMEsfinancing difficulties.