The Cost Of Equity Capital Of Listed Companies Influencing Factors

In the corporate system dominated by modern enterprise system, business ownership and management rights have been completely separated, the Accounting entity assumptions has become firmly rooted. For enterprise operators, debt capital and equity capital are all foreign capital, the difference only lies in financing channels, financing cost and forms. However, for a long time, the calculation of cost of equity capital is often overlooked by businesses. One important reason is to determine the cost of equity capital is difficult.1964, U.S. economists Harry Markowitz and William F. Sharpe raised the capital asset pricing (CAPM) model. Since then, the Western companies in financing decision-making on the main risk of using the concept of pricing, cost of capital. The traditional capital asset pricing model under the classic assumption that systematic risk (βcoefficient) is the only explanatory variable in the level of cost of equity capital changes, that is, the higher the systematic risk, the higher cost of equity capital. However, early 80s, many foreign scholars in the rate of return on securities empirical studies have found a series abnormal phenomenas which CAPM can not explain. The discussion on overthrowing the classical theory and further improving it with the development of capital markets is still very intense until today in foreign academic. Chinese scholars based on the introduction and learning of the advanced theory and method, conducted a preliminary solid analysis of China's capital market practice, made some interesting propositions and policy recommendations. The relationship between stock market risk and premium is a popular focus of attention for many years,but the fundamental factor which affect the cost of equity capital of listed companies is a more attention research project recently, in theory, yet there is no uniform knowledge. Therefore, how to understand the risk factors which impact listed companies' cost of equity capital in China's securities market is undoubtedly important theoretical and practical. In this paper, first, we review the influence factors of the cost of equity capital in domestic and foreign listed companies,on this basis, combining the characteristics of China's securities market andcorporates,raise the factors which could impact China's listed companies' cost of equity capital theoretically. Then, take the main board listed companies of Shenzhen stock market in 2006 as the study sample, by establishing mathematical models and using statistical software to research the factors affecting listed companies' cost of equity capital. The results show that the capital asset pricing model in China's securities market is not applicable,p coefficient of listed companies can not be the only explanation of the cost of equity capital; China's stock market did not show a good "Protective effect of the interests of investors" and a obvious "Value growth effect", level of information asymmetry, the first largest shareholder equity ratio, stock turnover, and industry average net profit margin to a certain extent, reduces the cost of equity capital of listed companies, the stock market's pricing mechanism has not from the company's basic characteristics and industry characteristics accurately reflect the cost of financing of listed companies; the stock market does not from the company's growth, financial risk, operational risk and other fundamentals to make a reasonable price on the company's stock value.Finally,based on the empirical findings of the study, targeted ideas to enhance the protection of the interests of investors, strengthen information disclosure, optimizing equity structure, improve corporate governance and strengthen the cultivation of professional quality investors, such as policy advices are raised, we hope these measures can play an active role in developing investors' properly investment philosophy, lowing the cost of equity capital of listed companies and promoting the development of China's securities market healthily.