Study On The Influential Factors Of The Cost Of Equity Financing In Listed Companies

The cost of equity financing is the primary factor to be considered when a listed company carries out the financial decision-making. With the rapid development and constant improvement of Chinese securities market, the market environment of listed companies and the factors that influence the cost of equity financing is also changing and becoming increasingly complex. In this paper, the author took the IT listed companies that existing studies are rarely involved as the object of study, and targeted in-depth to explore the problem about the influential factors of the cost of equity financing. This has important theoretical and practical significance for listed companies to improve the level of financial decision-making, reduce the cost of equity financing and the capital structure, and further explore the issues that the differences in financing behavior of different industry in the future.In this paper, the author took the cross-sectional data that the Chinese Shanghai and Shenzhen A shares of IT listed companies as the study sample, and drew on existing research methods to research on the influential factors to the cost of equity financing. First of all, applied the discounted residual income model (RIM) to calculate the cost of equity financing of sample companies. Secondly, according to the theoretical analysis of influencing factors of the cost of equity financing, the author selected 10 indicators as explanatory variables that were able to represent market volatility (βcoefficient), company basic attributes (include company size, company growth, business risk, stock liquidity), company financial condition (include financial risk, Book-to-Market Ratio , profitability, asset turnover), company governance (the shareholding ratio of the top five shareholders). At the same time, the author proposed the study hypothesis. And then, established the multi-linear regression model for empirical research in this paper, with the help of SPSS16.0 software and used he sample descriptive statistics, correlation analysis, stepwise regression analysis and other methods to educe the influential factors that the cost of equity financing and investigate the intrinsic relations between those influential factors and the cost of equity financing. Finally, by analyzing the different sections of the sample data to test the stability of the results of this study, and determined the multiple linear regression model the cost of equity financing. The results of this empirical research show that:βcoefficient (BETA), business risk (VOE), financial risk (DAR) and Book-to-Market Ratio (BM) is significant positive correlation with the cost of equity financing respectively, and those are major factors that influence the cost of equity financing of Chinese IT listed companies. So the cost of equity financing could be i estimated by the calculation of BETA,VOE,DAR,BM, thus reliable references and scientific guidances could be provided when a listed company carries out the financial decision-making.