| Nowadays, Equity financing is the mainly way of gaining equity capital for listed company. As a result of research, the factor that influence the cost of equity capital includes systemic risk, enterprise scale, par value ratio, debt ratio, listed company’s Information disclosure quality, the legal environment, government intervention and so on. In fact, to the investors, there’s a risk of enterprise’s equity financing. Except for the good financial data, an executive team which has proved ability, good reputation, and be worthy of trust will be more popular. Therefore the reputation of general manager has an impact on the investors and then the effect and cost of equity financing. However the current prediction model of equity capital’s cost doesn’t include this factor. Therefore, in this essay, it is supposed that there’s a negative relationship between general manager’s reputation and the cost of equity capital in the stock market of China. That is to say the enterprise, whose general manager has better reputation, will has a iower equity capital cost. And it validate this hypothesis through regression analysis as the general manager’s reputation being a factor that influence the cost of equity capital. And it also makes a conclusion and policy-based suggestions to review the influence of general manager’s reputation to the cost of equity capital in a wider point of view.The research of this essay will enrich and perfect the factor that influence the cost of equity capital, and make it more suitable for the economic environment of China. For a country as China which doesn’t have enough investors’ protection and has a high concentration of equity, discussing the economic result of general managers’ reputation will be a key factor to understand the enterprise’s financing behavior, and will be helpful for us to better understand the corporate governance and external financing of enterprises in China. |
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