Empirical Analysis On Cost Of Capital Of Chinese Listed Companies

Cost of Equity Capital is an important consideration for both listed companies making financing decisions and scholars doing capital market research. Therefore, our research made China Stock A listed companies as the sample, trying to interpret cost of equity capital by calculating its value, then regressing it with related factors and comparing it with debt cost. We make innovations on establishing systematic way of studying cost of capital in the theory part and enlarging the sample and retesting controversial points in the practice part. Conclusions we got are as follows:(1) The average value of e is 0.018, while that of b is 0.049, which means the value of e is less than b on average from 1998-2004. The reason for that could be traced to the lack of limitations on the dividend distribution. Many companies escape from the cost of cash dividend in some way, which leads to the low value of e.(2) The variables which affect e apparently include company scale, ROA, growing trend and B/M. Their relationships with e are as follows: Growing trend and B/M have a positive correlation with e while ROA and company scale have a negative correlation.(3) Information asymmetry and market disorder are the factors that influence e most obviously and steadily, which refers that risk consideration on these two problems are already included for the investors. On the contrary, the effect of agency problem is not quite obvious, which hints that the supervision of investors on the listed companies are not very effective and the evaluation of the stock still needs to be improved.