Capital Allocation Efficiency Research Of Stock Market Based On Information Disclosure

Information disclosure theory is one of the advanced research fields of finance theory. Since EHM came into being (Fama,1970),more and more researches fasten on the incomplete information in stock market. In realistic market system, the incomplete information situations between participants of the stock market (companies, governments, investors and other interest-related persons) was abundant, which makes information is very important for stock market.The key function of stock market is capital allocation. As the main direct financing market, stock market is the joint of capital surplus departments and capital shortage departments. Stock market accelerates the flow of capital in all department of economy, and enhances the output level of whole economy. Information disclosure is the main measure of reducing the information incomplete. But there is not complete research on whether the higher quality of information disclosure can enhance the efficiency of capital allocation. Chinese stock market is emerging market with low market transparency and low efficient information system, so it has great theory value and realistic value to research the relationship between information disclosure quality and capital allocation efficiency and setup the correlative systematic research frame based on Chinese stock market.This article based on the following common knowledge: the price of secondary market has indirect effect to the capital allocation, only the price of issue market has direct effect to the capital allocation in stock market. So the research of information efficiency can not answer the real relationship between information disclosure and capital allocation. According to Dow and Gorton (1973), although the price of secondary market is the most information efficient price in capitalism economy, it has not direct function in the process of capital allocation. So, even the price of secondary market pass the test of information efficiency, we still can not say the capital allocation of stock market is efficient. Willam.H.Beaver (1998) also point out that the market efficiency does not include the meaning of society demand, which just discusses the relationship between information and stock market. The conclusion that the higher market efficiency means better indirect capital allocation can not be right (Gao Xuqiang and Gao Daode, 2001). Based on the above common knowledge, this article researches the relationship between information disclosure quality and capital allocation according to the issue market. In the issue market, the capital the issue companies can raise is enslaved to two factors: the issue price and the issue cost. So this article researches the relationship between information disclosure quality and capital allocation based on two factors of issue price and issue cost.The basic structure of this article is: Chapter 1, Preface. This section mainly introduce the research background and research design; Chapter 2, Summarization of information disclosure and comment. This section divides the present research of information disclosure into four systems, summarizes and comments these researches; Chapter 3, Information disclosure transmission mechanism and the price effect. This section discusses the information disclosure transmission mechanism in stock market, and analyzes the asset pricing under the asymmetry information situation and the mechanism that information disclosure affects issue price. This section also carries through two empirical researches based on Chinese stock market. One research the relationship between the evolvement of information disclosure system and IPO pricing efficiency, the other researches the relationship between the information disclosure quality and refinancing pricing efficiency based on the reputation theory; Chapter 4, Information disclosure and financing cost: mechanism and empirical research. This section researches the mechanism that information disclosure quality affects financing cost, and carries through a empirical research based on Chinese A stock market; Chapter 5, Information disclosure and capital allocation efficiency of stock market. This section discusses the mechanism that information disclosure affects capital allocation efficiency of stock market, research the adverse choice, moral hazard and capital allocation situation in Chinese stock market. Besides, this section also carries though one empirical about the relationship between information disclosure quality and capital allocation efficiency based on Chinese A stock market. Chapter 6, Status quo and improvement of Chinese information disclosure quality. This section researches the status quo of Chinese information disclosure quality, and discusses the reasons why information disclosure quality is not good in Chinese stock market.then the section bring forward some suggestions to improve the information disclosure quality in Chinese stock market. Chapter 7, Research conclusions and prospect.This article gains the following results:1. The development of Chinese information disclosure system is good to reduce the underpricing rate and fluctuation of IPO.2. The listed companies will consider the reputation if they want to refinancing, and information disclosure quality, as the index of reputation, has insignificant relationship with the refinancing pricing efficiency, although the sigh indicates information disclosure quality can enhance the refinancing pricing efficiency.3. According to relationship between earnings information quality and equity financing cost, the empirical researches indicates earnings information quality is negative correlated to direct financing cost insignificant, but is positive correlated to indirect cost and total cost significantly. The result indicates earnings managements of listed companies reduce the transparency of information, enhance the information asymmetry with investors and equity financing cost.4. Information disclosure can reduce the adverse choice and moral hazard during the process of equity financing, enhance the efficiency of capital allocation. And the empirical research also indicates information disclosure quality can enhance the efficiency of capital allocation significantly in Chinese stock market.5. Through researching the status quo of information disclosure quality in Chinese stock market, the article finds some factors of low information disclosure quality in Chinese stock market: low inner governance, failure exterior governance, illogical investor structure and low investor quality.Main innovations of this paper:1. Establishing a systematic research framework about the relationship between information disclosure and capital allocation efficiency. The article bring forward an idea that the direct effect mechanism of capital allocation efficiency is leading capital to flow from low efficient industries to high efficient industries. So the price of security secondary market does not affect capital allocation efficiency directly, only the price of issue market can affect capital allocation efficiency directly. According to above idea, the article establishes a research framework: information disclosure—>issue price and financing cost—>capital allocation efficiency.2. Discussing the inner mechanism of information disclosure affect issue price, financing cost and capital allocation efficiency through theoretic model. Using Bayes study process, the article proves that higher information disclosure quality can affects the information precision received by investors, then affects issue price; Through reputation model, the article proves the mechanism of information disclosure affecting issue price; The model of this article also explains the mechanism of information disclosure affects equity financing cost; the mechanism of information disclosure affecting capital allocation efficiency is that higher information disclosure quality can decreases the information's asymmetry between issuing companies and investors, and then decreases the adverse choice and moral hazard.3. This article carries through some empirical research about the relationship between information disclosure and issue pricing efficiency, equity financing cost and capital allocation efficiency based on Chinese stock market. At present, only few scholars researched the relationship between information disclosure and refinancing cost based on Chinese stock market, nobody studied other facets of information affecting capital allocation efficiency. So our empirical researches based on Chinese stock market supply the gaps, and form systemic empirical results about information disclosure, equity financing cost and capital allocation efficiency based on Chinese stock market.