A Study On The Factors Affecting The Capital Cost Of Listed Companies

The cost of capital is one of the key concepts of financial management, as well as an important factor to be considered in financing decisions. In the corporate system dominated by modern enterprise system, business ownership and management rights have been completely separate.For enterprise managers, the cost of debt capital and the cost of equity capital are both foreign capital. Cost of debt capital is easy to determine, the creditor and the debtor usually already agreed borrowing rate in the loan contract, the interest rate that is agreed upon for the cost of debt capital. However, it is difficult to determine the cost of equity capital, estimates of the cost of equity capital has always been a hot spot for scholars at home and abroad. When listed companies make investment decisions, usually looking to lower the cost of financing, due to the cost of debt financing is relatively easy to determine,company reduce the cost of financing comes from the cost of equity financing. Therefore, through estimates of the cost of equity capital, analysis of factors affecting the cost of equity capital, provide recommendations and references in order to reduce the cost of equity capital is of great theoretical and practical significance. Based on theoretical analysis and empirical research on the basis of trying to in-depth study of factors affecting cost of equity capital, equity capital cost estimates to provide a valuable reference.Chinese stock market is an emerging stock market, shares a complex and changing environment, it is also very difficult to determine the cost of equity capital. Company risk factors on interests capital cost has important effects, early in 1962 years Granville low Sharpe, proposed of CAPM model in the, with Beta coefficient on company risk for measure, research found, single assets and whole market of linkage sex more big, the items assets of system risk more high, interests capital cost more big, system risk and interests capital cost significantly are related. Company financial risk is effects interests capital cost of important factors, Enterprise optimal capital structure of MM theorem showed that, dang enterprise bear liabilities degree more high Shi, is assets liabilities rate more high, Enterprise faced of claims debt pressure more big, bankruptcy risk also on more big, so equity investors will requirements more high of investment returns to cover by bear of bankruptcy risk. When the company’s financial risk is large, the financial leverage of the company is large, profit margins before interest and taxes for the cost of equity capital yields "leverage effect". Under normal circumstances, we believe that rational investors are risk-averse, so that with the improvement of financial risk, equity investors the minimum required rate of return will also increase. Size is also a number of scholars in the study of the cost of equity capital of the company taking into account a factor, mature capital markets in Europe and America, the company "scale effect", the bigger company, lower the cost of equity capital. As China’s capital markets are not mature enough and perfect, the company "scale effect" is not obvious, equity investors keen on speculation "small-caps", company size and the cost of equity capital is related to bigger companies, cost of equity capital is higher. First big shareholders holdings proportions is company equity structure of important part, dang first big shareholders holdings proportions high Shi, it has larger of control right advantage, may will produced big shareholders erosion small shareholders interests of risk, so equity investors in for investment Shi, will requirements high of investment returns to as bear this risk of compensation, makes first big shareholders of holdings proportions and interests capital cost significantly are related. On stock liquidity has a significant impact on the cost of equity capital, research conclusions vary. Based on European and American capital markets study, results usually indicates that a stock liquidity and the cost of equity capital, stock turnover larger stocks activity in larger transactions more easily, with less risk, less the cost of equity capital. However, the liquidity effect is not obvious in China’s securities market, a higher exchange rate reflects the company’s stability, there was even suspicion of speculation, so when the stock market liquidity is large, the cost of equity capital and will be higher. Fama, and French (1992,1993) believes that market risk, company size and book are worth less than three factors and the cost of equity capital of the company has significant, and present a three-factor model in cross section than the capital asset pricing model has a better explanation. When you book value higher than about stock is grossly undervalued, equity investors will demand a higher return on investment. Basic earnings per share, the company’s growth, equity agency cost but also many scholars in the study of factors need to be considered when factors affecting the cost of equity capital.Paper first on both at home and abroad related literature for recalled, and combines China Securities market environment and company features, select Bell Tower coefficient, and risk level, and company scale, and equity agent cost, and company development capacity, and company governance, and book market than, and basic each unit proceeds, and stock for hand rate nine a factors; then established empirical model, select Easton model on interests capital cost for estimates, Verified by univariate analysis and multiple linear regression effect of the above factors on the cost of equity capital. The results of this study show that(1)BETA coefficient, financial leverage (ASR), book value ratio (BM), firm size (LnASS), the largest shareholding ratio (SHR) and is positively related to the cost of equity capital; (2) Basic earnings per share and equity capital cost was negatively correlated, can objectively reflect the basic earnings per share per share profits and losses when earnings per share higher, lower the cost of equity capital. Company (GR), equity agency cost (EAC) has no significant correlation with the cost of equity capital. (3) is positively related to firm size and the cost of equity capital, shows that China’s securities market has shown good "scale effect", on the other hand, many equity investors keen on fried small-capitalization stocks in China, so that China’s securities market has serious "small effect", the company is bigger, bigger the cost of equity capital. (4) stocks have no significant correlation between liquidity and the cost of equity capital. From theory see, stock liquidity more good, risk more low, interests capital cost more low, however, in China Securities market in the, liquidity effect on China stock market cannot completely effective, caused this results of factors may has company stock for hand rate high, description company stock stability poor, and high for hand rate, and high volume of stock often has was hype of suspected, description China stock of speculative is strong, many equity investors purchased stock is to short-term sought post income, and not to made long-term investment proceeds.