Relationship Between Quality And Cost Of Equity Capital Of Financial Information Disclosed

For an effective operation of the capital market, the true, accurate, complete andtimely disclosure of financial information is very important. Upgrading the level ofinformation disclosure of listed companies has practical significance, especially inprotecting the interests of small investors and creditors, improving the corporategovernance structure, contributing the efficiency of capital markets.Equity cost of capital which is a minimum rate of return required by investors, isone of the core concepts of financial management subject; It has a direct impact bothon corporate investment/financing decisions and whether corporate shareholderwealth maximization objectives are being achieved. The high-quality informationdisclosure of listed companies is helpful for them to obtain equity financing, andtherefore it has an important impact on the cost of equity capital. The relationshipbetween the information disclosed quality and the cost of equity capital, is one of thehottest issues of theoretical research community at home and abroad in recent years.Based on the previous research, we start the paper from the following aspects.Firstly, we introduce the definition of financial information disclosure and the equitycost of capital. Secondly, we have a brief review of several major equity capital costestimation models, and an analysis of the relationship between the financialinformation disclosure quality and the equity cost of capital, starting from thetheoretical basis (the effectiveness of the capital market hypothesis, the theory ofasymmetric information, agency theory, etc.). Thirdly, we put forward assumptionsand build the overall model.With regarding to the variable selection, we use “Shenzhen Stock ExchangeInformation Disclosure ratings” as a measure of the financial information disclosurequality, and adopt economic growth the model (OJN model) to calculate the equitycapital of the listed company cost, and select β coefficient, asset size, financial risk,the level of profitability, market volatility and asset turnover as control variables.China’s Shenzhen A-share real-estate industry listed company’s financialindicators of2009-2011are selected as the object of study. Through descriptivestatistics, correlation and multiple regression analysis, we revealed the impact of thespecial extent between the financial information disclosure and the cost of equitycapital, and come to a conclusion that there is a significant negative correlation between them. In the end, we put forward some suggestions and explain thelimitations and shortcomings of the study.