The Cost Of Equity Financing And Quality Of Information Disclosure Empirical Research

With the development of the securities market, the business environment of enterprises is also undergoing tremendous changes. Under the background it has become an urgent requirement for investors, which the enterprises provide timelier, more transparent and reliable information disclosure. Meanwhile, information disclosure of listed companies is conductive to the stock market that followed a reasonable law of value, alleviated the negative impact brought by the adverse selection and asymmetric information, and healthily developed. So people are paying more and more attentions to the disclosure quality of listed companies.Market is a multivariable market that is subject to many factors. The paper makes a study on the relationship between disclosure quality and cost of equity capital if listed companies in China.This paper used the remaining proceeds DCF model to calculate the cost of capital, taking 1066 listed companies on A share in Shanghai Stock Market and Shenzhen stock markets during 2005 and 2006 as samples by means of Zeng Ying, Lu Zhengfei teachers. First separately introduce the indices of disclosure quality and cost of equity capital of listed companies. The thesis tries to analyze the disclosure quality of listed companies from two angels: the overall disclosure quality and the economical disclosure quality. Earnings smoothing and earnings aggressiveness are the dimensions that measure the economical disclosure quality of listed companies. The thesis used two methods to measure the overall disclosure quality of listed companies: the data of listed companies in ShenZhen stock markets are directly obtained by the evaluation results from ShenZhen stock markets; the data of listed companies in Shanghai stock markets are obtained by establishing rating standards. Meanwhile the cost of equity financing is influenced by all kinds of factors, which the thesis separately analyzed from several angels: market volatility, company scale, financial risk, profit level, assets turnover, market anomalisms and operation risk. Secondly the thesis provided two hypotheses, which are tested by joint hypotheses and respective test, by describing the variables. Finally draw a conclusion. The thesis tested the sample from three angels, for making the conclusion more exactly,①annual: we use the remaining proceeds DCF model to respectively study the sample that listed companies on A share in Shanghai and Shenzhen stock markets during 2005 and 2006;②sub-market: we use the remaining proceeds DCF model to overall study listed companies on A share in Shanghai and Shenzhen stock markets;③extract industry samples: we use the remaining proceeds DCF model to study the estate industry that is representative in Shenzhen stock market.The thesis is improved based on formers' study by research. First we increased the scale of the samples, which increased the study of Shanghai stock market based on the study of Shenzhen stock market, for making the conclusion more exact.; secondly from many angels to analyze ,which introduced the estate industry, making the conclusion more reliable; finally we changed several variables, which increased the variable of operation risk and the factors in firm growth, and developed the conclusion of Zengying and Lu Zhengfei; under the background that the dimensions in Shanghai stock market are not directly obtained, the thesis obtained the data by establishing rating standard.Depend on the description of variables and sample test, we can draw a conclusion: the higher disclosure quality, the lower cost of equity capital; on the contrary, the lower disclosure quality, the higher cost of equity capital. They show a negative correlation.At last the thesis made a serious of policy recommendations to decrease the cost of equity capital by research.①We decreased the influence earnings aggressiveness , financial risk, profit level on cost of equity capital, through adjusting assets scale and assets structure.②The factors that influence on cost of equity capital are divided into human controlled and non-human controlled. As human controlled , the thesis made some recommendations to improve them.③Through enforcing the law strictly and intensifying the degree of supervision, the thesis increased disclosure quality to decrease the influence on cost of equity capital.