The Study On The Influence Of Information Transparency On The Cost Of Equity Capital

The influence of the information transparency on the cost of equity capital is an important field in the study of international capital market. The information disclosure is drawing more and more attention in our country. From the company's point of view, this paper makes a deep theoretical analysis on the relationship between information transparency and information disclosure from the aspect of stock liquidity, market risk and expected cash flow. On the basis of analyzing the definition and the evaluation standards of the information transparency, this paper explains in detail the measurement of information transparency, cost of equity capital and other relevant factors. According to the data of the listed companies in 2005 in Shanghai and Shenzhen, this thesis analyzes the influence of the information transparency on capital cost in the listed companies in our country by using the empirical study based on cross-section data and multiple regressions.The empirical study investigates the influence of the information transparency on capital cost from the two aspects. First of all, the study introduces the surplus quality (usually used by foreign experts) to evaluate the information transparency. The sample company with a positive surplus quality is classified as radical group and that with negative surplus quality is as conservative group. And then, the study calculates the cost of equity capital by selecting the proper GLS model and assesses the information transparency (the radicalness and the conservativeness of the surplus) of the listed companies in our country according to the relevant data of 938 listed companies (including 587 companies in radical group and 351 companies in conservative group) in Shanghai and Shenzhen in 2005. At last, a regression model is established:cost of equity capital equals to F (information transparency, and other control variants)The results show that the information transparency is in inverse proportion to capital cost evidently in the 587 radical companies and 351 companies with conservative policies.From the study, the conclusions are as follow:a high information transparency can lower the capital cost of the listed company, and a good management is conductive to promote the business performance in the company.