The Empirical Study Of The Influence Of The Corporate Governance On The Cost Of Equity Capital

Corporate governance is a group of the institutional arrangements of standarding the related parties' responsibilities, rights and interests and is also the most important Institutional framework which includes a set of relationships between among corporate managers, directors, shareholders and other stakeholders.Through this framework,the company's goals and the means to achieve these objectives are identified.But in the book "Modern Enterprise Financial Management (Tenth Edition)" written by James C. Van Home JihnM.Wachowicz,the cost of equity capital is illustrated clearly and they point out that the cost of equity capital refers to the required rate of return of equity capital,which is the minimum rate of return of the requirements of equity owners.In order to reduce the company's cost of equity capital,The listed companies often need to study the factors affecting the cost of equity capital.By previous studies,we can learn that the financial leverage, systematic risk, firm size, book value ratio, growth opportunities, and etc all have some impact on the companies' cost of equity capital.So does the corporate governance factors have an important impact on the cost of equity capital?This paper studies systematically the impact of corporate governance on the cost of equity capital from all levels of corporate governance.In this paper, the cost of the company's equity capital is calculated by the discounted residual income model (GLS model).The influence of the corporate governance factors on the cost of equity capital are tested systematically by controlling the other factors influencing the cost of equity capital and choosing the 286 listed company's data before 2009 of the Shanghai Stock Exchange.The results show:Proportion of the largest shareholder and board size are associated with the cost of equity Other variables of corporate governance and between the cost of equity capital did not show significant correlation. This shows that the current governance structure of listed companies in China affect the cost of equity capital is not the main factor.