Research On The Correlation Between Information Disclosure Quality And Cost Of Equity Financing In Domestic Listed Companies

Information is the important link between capital demander and supplier in capital market.From the investor level, information disclosure is the main way for investors to know moreabout listed companies, and is also an important basis for investors to make decisions. From thecapital market level, the information disclosure quality has become an important factor inrelationship to the development of capital market, while cost of equity financing has become animportant index to measure the development degree of stock market. In the present research,the relevance between information disclosure quality and cost of equity financing has becomean important topic of the capital market research. But if the application of the foreigntheoretical model and research findings is worthy of Chinese securities market deserves furtherstudy.Firstly in this paper, the problems in the present research are excavated through the reviewof domestic and international study. Secondly, according to the efficient market theory andsignal transfer theory, we analyze related theory about information disclosure quality and costof equity financing, and it is also to lay the foundation for the empirical analysis. And then weresearch the relationship between related through empirical method.The empirical research isthe main content of this paper. In the measurement of variables, the information disclosurequality the established index system. Cost of equity financing is measure by classical capitalasset pricing model. In the aspect of empirical analysis process, we analyze the sample datawhich adopts from the Shenzhen Stock Exchange in the year2010. In order to increase theresult’s credibility on time sequence, sample is extended to the year2007,2008and2009, andthen in order to increase the result’s credibility in space, a series of research and analysis hasbeen made,in which sample is expanded into Shanghai Stock Exchange.All results support the conclusion, that there is negative relationship between informationdisclosure quality and cost of equity financing, it means that we can improve the informationdisclosure quality to achieve the purpose of reducing cost of equity financing in listedcompanies.Meanwhile, results also show that the company size, book-to-market ratio have anegative correlation with the cost of equity financing, management risk, financial risk have apositive correlation with the cost of equity financing. In view of this, we give severalcountermeasures and suggestions, which range from specifying information disclosurestandards, improving governance structure and strengthening the investors’ self-protectionsystem, and so on, in order to perfect information disclosure evaluation system and promote the development of Chinese capital market. Overall, studies in this paper have importantsignificance to improve the information disclosure quality, promote the financing efficiencyand perfect information disclosure evaluation system.