The Relationship Between Investor Protection And Financing Cost

The financing cost of enterprises has been one of the key questions of modern financial theories. With the development of investor protection, more and more researches begin to focus on the financing cost from investor protection prospective. From the summary of domestic and international documents, we find that all the international documents focus on influence of investor law protection on financing cost only, the domestic documents follow it at the first, but with the development of this research some people begin to investigate the relationship between investor protection and the financing cost from corporation institution arrangement prospective.In our present situation, the fact that big shareholders control the company as a whole is serious. In this premise, investor protection became the important link between investors and company. Investor protection level directly affect financing costs, and also directly affect the development of the capital costs. So, research between investor protection and the financing cost has important theoretical and practical significance.This thesis select304listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange as the research sample. Based on the domestic and international documents, select Discounted Residual Income Model to measure the financing cost and measure investor protection from both macroscopic part and microcosmic part. Then we builds theory models to conduct the empirical research. Our analysis shows a negative and highly significant association between all the variables. A problem worthy to be pointed out is that remarkable relationship in2008is better than2007. It means that the level of investor protection increase though the whole level is not high and the investors are able to treat companies with difference level of investor protection differently.