Information Quality And The Cost Of Equity In Domestic Listed Companies

In recent years,researchers have been more and more concerned about the influence of the quality of information disclosure on the equity cost.In the stock market,information serves as a bridge connecting the money suppliers and the money demanders.On the one hand,through information disclosure,the listed companies can inform investors of the basic situation of the companies,as a result,they can collect enough fund for their expansion.On the other hand,investors can make their decisions according to the information issued by the companies,which results in the transfer of the fund among different companies.Information disclosure with high quality is of great significance to the investors as well as the listed companies.In-time,accurate,reliable information can improve the efficiency of the market.Because the investors can make right decisions based on the accurate information.And in return,right decisions can create benefit to the investors and cause the fund to flow to the companies which are strong, stable,less risky. Obtaining the fund, these companies are able to expand their businesses and therefore definitely take advantage in the competition and win over those which lack fund. This kind of system will make the market prosperous. As a result,the quality of the information disclosure is of significant concern to the listed companies,the investors and even to the regulators. The aim of information disclosure is to raise the fund in the stock market whereas the shareholders invest in the market with the purpose of either obtaining capital gains or dividend. Collecting fund will result in the cost and invest will definitely ask for return.As the price paid for gaining funds and the rate of return required by the money suppliers,equity cost is definitely the focus of both investors and listed companies.For the listed companies which pursue the maximum profit,naturally, the lower the equity cost is,the better.There are a lot of ways to decrease the equity cost, for example,improving the governing structure of the companies,lower the operational risks and so on.This paper focuses on the influence of the quality of information disclosure on the equity cost.I try to analyse whether the two are relevant and what the relevance is.This paper samples the listed companies in the Shen zhen security market during 2006 and 2007(because of the difference in the system of information disclosure between the ST companies and others,ST companies are not included in the sample.)firstly,I analyse the relevance of the quality of information disclosure and the equity cost using the data of 2006 and 2007 respectively.The result shows that the two are irrelevant.Considering that the quality of information disclosure may have a lag effect on the equity cost,I analyse the relevance of the two with the data of the quality of information disclosure in the year of 2005,2006 and 2007.This time, the result shows that the R-quared has been a little bit improved,but the value is still very small.So,I draw the conclusion that the two is barely relevant in domestic market. And in the last part of my paper, I try to figure out the reasons which contribute to the phenomenon.I think the reasons lie in the attitudes of the investors,the misbehaviors of listed companies,the measures adopted by the regulation authorities and the efficiency of our stock market.