The Empirical Study On The Impact Of Information Disclosure Quality In Cost Of Equity Capital Of Listed Companies

The impact of disclosure quality in cost of equity financing is one of the significantresearch areas in the capital market. Currently, theorists generally believe that improving thequality of information disclosure of listed companies can reduce equity financing costs whichby reducing different degree of information asymmetry between investors as well as betweeninvestors and managers, reducing the investors expected risk, and also improving the liquidityof the stocks. This conclusion is also supported by a number of scholars’ empirical tests.However, much more research is based on the economic environment in Western countries asa backdrop, which its securities markets is more perfect developed. Meanwhile China’ssecurities market started late; there are still some gaps between our securities market andWestern’s. Therefore, at this stage in our stock market environment, what the impact of thequality of information disclosure of listed companies in the company’s cost of equityfinancing should be considered? The relationship between quality of information disclosure oflisted companies and the cost of equity financing has been studied.Firstly, we analysis the literatures researched by both our countries researchers and othercountries. Based on a theory of efficient markets, asymmetric information theory, signalingtheory, we build theoretical framework. And we proposed two assumptions, one of them is the"the better quality of information disclosure of listed companies in current year, the lowerfinancing costs "; another is " the better information disclosure of listed companies inprevious years, the lower cost of equity financing in current year, but the farther away fromthe inspection year quality of information disclosure, the less significant impact on the cost ofequity financing ".Secondly, the paper,which taking2009~2011(the Shanghai Stock Exchange and theShenzhen Stock Exchange) Board A-share listed companies as samples, using the"entropy-based measurement system for information disclosure index" as a measure of qualityof information disclosure index, meanwhile, according to the PEG ratio method to calculatethe cost of equity financing, using multiple linear regression method, examine the impact ofquality of information disclosure of listed companies on the equity financing costs. Theresults show that after controlling for firm size, book-market ratio, financial risk, profitabilityand asset turnover cases, the quality of information disclosure of listed companies in differentyears will have an impact on the equity financing, the better the quality of informationdisclosure, the lower equity financing costs, but the farther away from the inspection yearquality of information disclosure, the less significant impact on the cost of equity financing.Finally, we summarize this article, and put forward relevant policy recommendations tolisted companies of information disclosure, note the limitations of this paper, and discussedthe future research directions.