Empirical Study On Measured The Cost Of Equity Capital Of Listed Companies In China

Cost of capital has been one of the important issues that a company to consider when making financial decisions.The cost of equity capital is a very important reference index of financing for the company, making the investment decision, dividend policy and using economic profit evaluation of corporate performance.How to measure equity cost of capital accurately for many financial circles of scholars has been a hot issue of concern and inquiry in a long time. Calculating the cost of equity capital is very complex and difficult.The scholars home and abroad made many models and methods to estimate and conduct tests and research with actual datas, but in case currently, no single method could give general unanimous approval of scholars.The thesis, first of all, based on the cost of equity capital home and abroad on the empirical estimation of a literature review, studies clarify the developmental context. This empirical study during the period selected for the share reform is completed, so the sample compared to previous studies are quite different, which is a big improvement compared to similar previous article.In the next section, the thesis highlights and explains some important models of equity capital cost estimate, including:Capital Asset Pricing Model, Intertemporal Capital Asset Pricing Model, Conditional Capital Asset Pricing Model, Arbitrage Pricing Theory, Three-factor Model, Four-factor Model and the Residual Income Model. Although the capital asset pricing model assumptions is more demanded, it is widely used in practice. The scholars home and abroad have actively carried out their research and development so that the application would be used well under actual conditions. Intertemporal Capital Asset Pricing Model and Conditional Capital Asset Pricing Model is part of the capital asset pricing model development, but the breadth of its application still insufficient. Arbitrage Pricing Model is a subversion of the CAPM which is a single factor model of the form. APT is a multi-factor model. The results from this study in foreign countries is relatively good, but because of the different level of maturity of the market, the model in our test results is not good, and in view of the subjectivity of selecting its elements, making the comparability of results needs to be improved. Three-factor model considers that the company size factor SMB, the carrying amount of the market ratio factor HML, the excess market return factor is the main factors of cost of equity capital. Four factors model is on the basis of three factors model. It adds a momentum factor in present. The model of our empirical research is also relatively small and the difficulties in gathering data is in a certain relationship. Residual income model is a valuation model that associated with the stock's intrinsic value and book value of equity and future earnings with stock, which established the accounting figures and stock carrying the direct relationship between the intrinsic value. The application of the model in recent years gradually increased, better results, but also more in line with China's market conditions.Based on the Capital Asset Pricing Model to our listed companies sample data for 2004-2008, the empirical analysis, the sample selected fully taken into account the possible impact of bias on the result, and the use of post-split share reform, the data obtained, stock returns and market returns, non-systematic risk, systematic risk measure of the value of the nonlinear relationship is not found, but systematic risk of the stock returns of the explanatory power is relatively strong, but the Capital Asset Pricing Model applicability in China should not be entirely negative. In addition, compared with the previous study, we can see that the adaptability of the Capital Asset Pricing Model is an improvement. In the Residual Income Model is also introduced in this thesis and summarized the theoretical model based on the use of Residual Income Model on the pharmaceutical industry 2007-2008 Shanghai Stock Exchange listed company estimates the cost of equity capital, due to be considered in estimating the influence of future and obtaining the relevant data model is also more in line with requirements. The result is good.The study on the current direction, the capital asset pricing model is still applied wider but the residual income model and other methods are also gradually attacted much attentions, which shows that researchers not only improve the method originally, but also actively seeking new ways to achieve reasonable accuracy in estimating the cost of equity capital of the company, which contributed to the financial management theory continuously improvement, kinds of methods of continuously get ahead.