The Impact Of Investor Relations Managements To The Cost Of Equity Financing Of Chinese Listed Companies

As one of the listed company’s most important means of financing equity,Investor relations management (IRM) has played an important role in allocatingresources and promoting growing of national economy in the capital markets. Withequity financing becoming the main channel of raising funds by listed companies,there have been a number of information asymmetry and adverse selectionphenomenon in capital markets, such as incomplete information disclosure and insidertrading, which has sparked a crisis of confidence. National regulators in order toensure fairness and equitability of the capital market, has taken a series of mandatorydisclosure means to strengthen market order. So, it was the beginning of investorrelations management.So as to investor relations management concept, it was originated in the UnitedStates. It has developed for years, and gradually formed into a complete system inWestern developed countries. As China’s capital market started late, we introduced theconcept of investor relations management in2000, to strengthen communicationbetween listed companies and investors and to help listed companies establish a goodcorporate image in the capital market. To investors the investor relations managementis aim to get better know of the management of the listed company. When it comes tolisted companies, investor relationship management can build a good company imageand let down the cost of equity capital.For now the current research of investor relations management is primarilyqualitative analysis in China, including the definition of investor relationsmanagement, factors affecting investor relations management on corporategovernance, etc. While few of them were involved in the management of investorrelations for the quantitative analysis. Taking into account the context of the sharereform, this article will analysis the relationship between the management of investorrelations and equity financing costs to make recommendations on the governance oflisted companies. This paper made the year of2010and2011refinancing of listedcompanies in our capital market as the sample to analysis. To beginning, we select amodel to calculate the residual income of the company’s equity capital market financing costs,then we create investor relations management evaluation system toevaluate the company’s investor relations management levels by listing by0-1assignment, finally we establish a multiple linear regression model to analyze therelationship between management of investor relations and the cost of equityfinancing, the final statistical results showed listed companies’ investor relationsmanagement and equity financing costs were negatively correlated.Based on above discussion, we made some suggestions: to beginning, listedcompanies ought to pay more attention to the work of investor relationshipmanagement. What is more, we should protect the interests of investors to promotelong-term healthy development of the capital market. In summary, we should enhanceunderstanding for investor relations management and the cost of equity financing inthe process of market economy construction.