The Listed Companies Empirical Research Between The Cost Of Equity Capital And Financial Performance

The cost of equity capital is the cost that companies use the funds from theshareholders,which is the important part of the capital cost.Under the perfect capitalmarket,the cost of equity capita equals to the rate of return of investors’ expectations,and italso is the links between the raisers and the investors.Recent years,scholars research the the influence factors on the cost of equity capital in order to find which factor is most important.The factors contain the informationdisclosure,corporate governance,accounting earnings,external environment,corporate characteristics.Because of our capital market is not perfect,so it’s difficult for us to get those information and measure the factors.However,the financial statements are information which investors and raises all focus on.And it also easy to collect.This paper researches the the relation between the cost of equity capital and the financial performance using the information from the financial statements to provide the suggestion for the investors the raisers.Study found that we can classify the financial factors into two parts.One part reflects the company’ value of investments,the other part reflects the company’risk.When the value of investments is very high,investors will hope companies allocate them moreprofits,the cost of equity capital will increase.When the company’risk is high,the costof equity capital will also increase.This thesis is divided into five chapters:The first chapter is an introduction.It discusses the research background,purpose and significance research ideas and methods of the thesis,innovation and inadequacies.The second chapter is a theoretical basis.It discusses the basic concept,estimationmodel,the relations between the cost of equity capital and the financial performance.The third chapter is a model building.It contains the hypothesis,variables’ choice and calculation.The fourth chapter is the model’analysis and examine.It contains the statistical des cription, regression analysis and testing, different industries’ contrast.The fifth chapter is conclusions and recommendations.It summarizes the results ofthe above chapter,and applies the recommendations for the investors and fund raisers.