A Study Of The Impact On Financing Cost Of Equity Of Agricultural Listed Companies

Equity financing is a crucial concept in the realm of financial management, it is in the meantime a primary factor for consideration when a listed company is preparing for equity financing. As the stock market matures, the domestic market has gradually converged with the international market. As a result, many abroad mature research results have been introduced into our domestic market as a reference for further research purpose. Although many domestic research results indicate that industry factors are significantly influential to the cost differences in equity financing, the majority of the researches are keyed to the entire stock market, seldom are targeted to a specific individual industry. In terms of control of financing cost and fund-raising option, agriculture related listed companies have inherent disadvantages. The mentioned disadvantages are derived from the features of agriculture:long production cycle and low profit. Less attention is focused on agricultural stocks by investors. To resolve these conundrums of cost control in the course of equity financing faced by agriculture related companies, the thesis chooses these companies as object of study, probing into the influences of the factors other than industry factors on equity financing, hoping to complete the research system and enriching the research contents.The thesis centers around the cost of equity financing and objects the agriculture related companies in the stock market in Shanghai and Shenzhen, sampling on the data from the year2006to2013. The research determines the evaluation method and make evaluation accordingly, adopting internationally agreed criteria (β coefficient, BM ratio, stock liquidity,company scale, financial risks, rate of capital turnover and ownership concentration.) as the basis for the empirical study of cost of equity financing.The research of the thesis adopts the multiple linear regression model to analyze the cost of equity financing and the forementioned seven factors in the criteria. The results remove the β coefficient (BETA), stock liquidity (SL) and ownership concentration form the ultimate model, fixing the four elements that influence the agriculture related companies’cost of equity financing as:BM ratio (BM), financial risks (FR), company scale (CS), and rate of capital turnover (AT). The empirical research will be conducted via STATA, including the sample of descriptive statistics, correlation analysis, multiple collinearity diagnosis of factors, regression and model viscosity stability test. Research results agree with the positive hypothesis in Chapter Four. In the meantime, the multiple regression model’s explanatory ability reaches43.76%. The explanatory ability of year-by-year regression stability test reaches20%～65%. The research results are satisfactory. Empirical research eventually fixes the four crucial factors that influence the cost of equity financing of agriculture related companies and acquires the proximate prediction equation, hoping to provide reference for strategic decisions for these companies and to reduce cost of equity financing.