A Study On The Relationship Of Non-financial Information Disclosure And The Cost Of Capital

Non-financial information is information including corporate governance, internal control, management discussion and analysis, the company’s future development strategy, business plans for next year, corporate commitment to environmental information and other information such as social responsibility and so on. It not only reflects the company’s internal operations situation, but also reflects the company’s future development ability. Non-financial information makes the capital market business information users fully understand the status and the future of the company. To say it in another way, it is the "window" for investors to see the real company.This article focuses on the capital cost effect channel, one of the channels through which non-financial information disclosure can affect the enterprise value. By doing theoretical and empirical research on the relationship between the non-financial information and the cost of capital, we reach the following conclusions:First, there is a negative correlation between non-financial information disclosure and the cost of capital; Second, the non-financial disclosure makes financial disclosure information more persuasive in explaining their impact on the cost of capital; Third, the disclosure of non-financial information needs to consider the impact of the industry factors, different industries needs different types of non-financial information; Fourth, there is an obvious feature about companies that happen to have the same level of non-financial information disclosure, which suggests that corporate characteristics have a significant impact on the strategy of companies’disclosure of non-financial information.Contributions and innovations of this paper is mainly reflected in the following points:First, this article effectively integrates theories about non-financial information disclosure and the channels through which non-financial information affect the cost of capital. We clearly show the complete channel transmission mechanism and the role of non-financial information disclosure in a company.Second, this article establishes a mathematical model about non-financial information disclosure and capital cost and proves the conclusion that non-financial disclosure and the cost of capital are negatively correlated.Third, previous studies generally selected profitable variables as control variables, but we choose variables such as ownership structure, tangible assets, etc., because we believe that cost of the capital is a variable capturing the risk and the cost of the company. This way we enhance the explanatory power of the model and its fitting degree.Fourth, the paper verifies the applicability of the relations between non-financial information disclosure and cost of capital in China’s capital market. Empirical studies on Chinese listed companies’data not only prove the existence of a negative correlation between non-financial information disclosure and the cost of capital, but also prove that industry factors and firm characteristics will significant influence the degree of the relationship between non-financial information disclosure and the cost of capital. This conclusion will provides useful advice for reference for the establishment of non-financial information disclosure guidelines in China’s capital market.