The Characteristics Of Comprehensive Income And The Cost Of Equity Capital Of The Chinese Listed Companies

There have been three years since that comprehensive income and other comprehensiveincome has been disclosed in the income statement. How is the quality of the disclosure ofcomprehensive income? What is the benefit to improve the quality of comprehensive income?In this paper, I examine the primary and secondary quality of the comprehensive income onthe basis of accounting information quality system, and analysis the influence of the primaryquality of comprehensive income on the cost of equity capital.When it comes to the secondary comprehensive income’s quality, I study it quantitativelyusing the corresponding model from five angles, which are persistence, predictability,smoothness, substitute for cash flows and value relevance, and compare the quality with thatof net profit to evaluate comprehensive income’s quality. When it comes to study theinfluence of the primary comprehensive income on the cost of equity capital, I consider therelevance and reliability.I find that comprehensive income has significantly persistent, predictability and valuerelevance, but its quality is generally weaker than that of the net profit. Substitute for cashflows impact of monetary policy by the large decreases continuously from2009to2011. Therelevance and reliability of comprehensive income both negative correlation the cost of equitycapital, the stronger the relevance, the higher the reliability, lower cost of equity capital.After added market volatility, company size, total assets net profit rate and book to market, therelevance and reliability of comprehensive income is able to explain the cost of equity capitalwell.