The Effects Of The Quality Of Informative Disclosure On Cost Of Equity

The relationship between quality of informative disclosure and cost of equity has long been a heated discussion in the field of finance and accounting. High quality information is key to both effective running of capital market and influencing theoretical and practical field, and even determining the operation and development of enterprises. Studying the subject of informative disclosure and cost of equity is beneficial to the field of theory and practice.On the background of China’s capital market,the paper tries to explore the mechanism between informative disclosure and cost of equity. The logical order of the article is as follows:first, review the literature from home and abroad;then construct the thereotical framework; and then perform empirical research based on China’s Growth Enterprise Market(GEM).This paper starts with the introduction of background of the subject and significance of the research, review the literature from home and abroad and describe the connotation and reality of informative disclosure and cost of equity and go deep into the the thereotical framework. Perform empirical research based on China’s GEM using Shen Zhen Stock Exchange evaluating criteria to measure quality of informative disclosure and CAPM to measure cost of equity and using multiple regression model to perform the research. Finally, based on the former theoretical and empirical research, present suggestions and enlightments on the study.In order to reduce cost of equity,listed companies should improve the quality of informative disclosure,especially in the market such as China’s GEM which has the characteristic of high technology, high risk and high growth. Basde on the analysis above,the paper presents policy suggestions from three dimensions:First, the standardability and adequacy of informative disclosure should be enhanced; Second, the framework of corporate governance should be improved;Third, the supervision system of informative disclosure should be strengthened and perfected. Only in that way could a sound investment and financing platform and a high-efficiency capital market be built.