Empirical Research On The Relation Of Disclosure And The Cost Of Equity Capital

Information and capital are the two basic elements of capital market. Information leads capital flow from the majority of investors to the listed companies, so as to achieve the most basic function of financing of the capital market. Information disclosure, as the behavior foundation of the "open" principles, is a fundamental belief and power source of modern capital market's development. As an important manifestation of information disclosure's economic results, the relation between information disclosure and the cost of equity capital has become the important issues in the field of accounting and finance. Information disclosure is the key factor to ensure the financing efficiency of the capital market, and the cost of equity capital has become the direct embodiment of financing efficiency. The relationship between them has become particularly important. Most foreign scholars have researched from two paths: increasing the liquidity of the capital market and reducing the prospective risk of investors. They have come to the conclusion: raising the quality of information disclosure can reduce the cost of equity capital. But the application of the foreign theoretical model and research findings to China's securities market is worthy of study and exploration.This essay outspreads analysis and comment firstly, puts forward the problems that need to be investigated. Then the essay introduces the theories of information disclosure and the cost of equity capital, and analyses the relationship in-depth. Empirical research is a major part of this paper. The author calculates the cost of equity capital under the ex-ante concept using the model of remaining proceeds. Taking into account of the form, content and scope of China's listed companies'information disclosure, this essay chooses three indicators: surpluses quality, overall quality and quantity of voluntary information disclosure. And also five control variables. The author chooses 579 listed companies from China's Shanghai and Shenzhen stock markets as samples. This paper, using correlation analysis and multiple linear regression analysis, verifies that improving the quality of information disclosure can reduce the cost of equity capital. At last, according to the results of this study and combining the unique environment of China's stock market, the essay proposes the relevant recommendations from management, regulatory departments and investors. This essay is of great significance to improve the quality of information disclosure and financing efficiency. It will also accelerate to China's listed company governance and the development of market evaluation of the quality of information disclosure.