A Research On The Relationship Between Earnings Disclosure Quality And Cost Of Debt Capital Under Credit Squeeze

As the development and improvement of capital market, the earnings disclosurequality is gaining more and more public attention. It is now becoming one of the mostpopular topics in the economic field. Researchers both home and abroad are mainlyconcerned about the economic result caused by the earnings disclosure quality, the waysto increase the earnings disclosure quality and whether information transparency candecrease a company’s cost of capital. A company’s capital cost includes cost of equitycapital, cost of debt capital and so on. There have been lots of researches made in theequity capital, and quite a number of practical and significant achievements have beenpresented. However, seldom do scholars study the external debt capital. It is found thathigh cost of equity capital may have positive effect on the external debt capital.Based on the tendency of modern economy theory, we could see that21stcenturywill be the time for macro and micro economics to merge together. Microeconomics isnow finding its way to deduce the implication of macroeconomics throughmicro-enterprise, while macroeconomics is in the opposite position. This paper is of greattheoretical and practical significance in researching the introduction of themacroeconomic policy based on the cost of equity capital and capital cost.This paper attempts to study the relationship between the earnings disclosure qualityand external debt capital cost under the condition of credit squeeze. This means to figureout whether increasing the earnings disclosure quality will decrease the external debtcapital cost when undergoing the deflationary policy. We will take the panel data ofA-share core listed companiesin Shenzhen Stock Exchange Market from2009to2011asthe research sample. First, the influence on the listed companies’ external debt capitalcost caused by the earnings disclosure quality will be measured. What’s more, when themonetary policy is changed to deflation policy, the influence on the external debt capitalcost caused by the earnings disclosure quality will be studies under the macroeconomicpolicy. Furthermore, a discussion on the efficiency of bank in arranging credit source willbe made when the monetary policy is changed to a deflation one. All of these aim toimprove listed companies’ earnings disclosure quality so as to lessen the unfavorableimpact to companies’ debt capital caused by the alteration of monetary policy.This paper consists of five chapters. The introduction will cover the research background, significance, framework, main idea, methodology as well as the innovativepoints and limitations. In the second chapter, we summarize and classify differentconclusions made by scholars both home and abroad. Chapter three presents thetheoretical foundation for the influence on the debt capital by earnings disclosure qualityand the constraint effect on companies’ capital by monetary policy. Based on these, atheoretical analysis has been done on the relationship between the earningsdisclosurequality and external debt capital cost under the credit squeeze policy. Empirical study andresult analysis are both demonstrated in Chapter four. The research sample will be thepanel data of A-share core listed companiesin Shenzhen Stock Exchange Market from2009to2011. Through the application of descriptive statistical analysis, correlationanalysis, regression analysis and other methods, we verify all the four assumptions putforward in this paper. Conclusion and further suggestions has been illustrated in Chapterfive. It is a summary of the theories and verified results mentioned above.