Research On Cost Of Equity Capital's Measurements And Influence Factors Of Chinese Listed Companies

Since the establishment of MM theory in 1958,the cost of equity capital which is defined as the price corporates pay for issuing common stocks in relevant papers has become a preceding topic in recent researches of corporate finance.The capital market in China is experiencing an emerging and transitional stage,therefore,compared to the companies in developed countries,China's listed companies present unique characteristics of capital structure,ownership structure and cash dividend policy of listed companies.However,the existing researches about equity cost cannot thoroughly explain how capital structure influent the cost of equity.Scholars in western countries largely focus on the impacts of agency problem between managers and shareholders on equity cost,and they haven't got an agreement on whether cash dividend relieves agency problem.Thus,researches on the relationships among capital structure,agency problem of controlling shareholder,cash dividend and equity cost of Chinese listed companies need combinations with the typical regulation background of China.Based on the summarizing of existing researches,this paper adopts GLS model,PEG model and OJN model to calculate the cost of equity capital and analyses the influenced factors of equity cost accounting to corporate traditional financial characteristics,agency problems and corporate governance.Firstly,consisting with the economic background of increasing corporate leverage and supply-side structural reform,our research discusses the influence differential from companies with different debt level on the cost of equity capital.Secondly,accounting to the concentrated ownership and diversified property right,we analyze how the agency problem between controlling and minority shareholder influents equity cost under situations of different controlling shareholder,shareholding rations and extent of separation between controlling right and cash flow right.Thirdly,in the perspective of agency problem between controlling and minority shareholder,our paper researches the governance effect of cash dividend distribution and its influences on equity cost with different characteristics of controlling shareholders.The empirical analysis is based on a sample of China's non-financial listed companies in Shanghai and Shenzhen stock exchanges from 2008 to 2013 and adopts both single variable analysis and multiple regression analysis.The results show that:(1)When listed companies rise the leverage ratio the increased profit cannot compensate for the excess risk,which results in a significant positive relationship between capital structure and the cost of equity capital.And such positive relation is more announced in over-leveraged companies.(2)Companies with severer agency problem face with higher equity costs.More specifically,the cost of equity capital is higher when company is not state-owned,with lower shareholding ratio or with larger separation between controlling right and cash flow right.(3)Cash dividend is an effective mechanism of corporate governance in China,which can relief the agency problem between controlling and minority shareholders and reduce the equity cost.Moreover,such effect is more announced in companies with non-state-owned controlling shareholder,lower shareholding ratio or higher extent of separation between controlling right and cash flow right,which indicates that the governance effect is more significant in the companies with severer agency problem.Above all,based on the unique environment of China's capital market,this paper investigates the relationship among capital structure,agency problem of controlling and minority shareholders and the cost of equity capital of listed companies.The research enriches the theory about influenced factors of equity cost in the perspective of traditional corporate financial characteristics,agency problem and corporate governance mechanism,which helps to the deeper investigation around the cost of equity capital of China's listed companies.Moreover,the empirical results show significant meanings for the improvement of resource allocation among companies,the perfection of regulatory policy of capital market and the increasing level of minority investors protection.