Analysis Of The Relationship Between Investor Relations Management And Cost Of Equity Capital

Investor relations management originated in the United States and it is a product ofthe western mature capital markets. It through strengthen the communication between theinvestors and the information to increase the investors to the company’s satisfaction, soas to realize the purpose of increasing the value of the company. Our country introducedthe investor relations management at the beginning of this century and formal researchon investor relations management is also in recent years. Although after several years ofdevelopment, our investor relations management has made certain progress and we haveaccumulated some practical experience, but it is still in its infancy. The enthusiasm andinitiative on carrying out investor relations management activities of our country’s listedcompanies is not high. Investigating its main reason is that listed companies have notrealized the investor relations management activities can bring economic value to thecompany. Therefore, this paper demonstrates the relationship between investor relationsmanagement and company’s equity capital cost by means of empirical analysis tostimulate our country’s listed companies’ investor relations management consciousness.Because the domestic research on investor relations management is relatively less,so this paper mainly borrowed from foreign research achievements of relevant scholars.This paper makes a rough introduce on the connotation and constituent elements ofinvestor relations management and briefly describes the equity capital cost theory at thesame time, also introduces several common equity capital cost estimation models. Thenthis paper introduces the efficient market hypothesis, the principal-agent theory, theasymmetric information theory and the theory of impression management, building upthe essential theoretical foundation of the research on the relationship between theinvestor relations management and the cost of equity capital. This article selects524listed companies from the A shares in Shanghai stock exchange as samples and makes anempirical testing on the relationship between investor relations management and the costof equity capital. The regression results show that in general, the listed companies’investor relations management activities can reduce the cost of equity capital. Finally, this paper puts forward several suggestions to improve the present situation of China’sinvestor relations management.