Ownership Structure、the Quality Of Accounting Information And The Cost Of Equity Capital

In recent years, due to the gradual completion of the reform of China’s stock in circulation, the stock market has been liberalized gradually, the small and medium board listed company develops rapidly, its population has to catch up with the main board listed companies, and it has become an active power in the stock market. Relatively its financing problems have become increasingly prominent, the main business is that its direct external financing costs is high. How to reduce the companies’costs of equity capital has become a hot issue.Author’s intention is to research whether the ownership structure could affect the company’s cost of equity capital directly. But after a lot of reading, I discovered that the articles about the research were not so many. More researches were focused on corporate governance affect the quality of accounting information, as well as the improvement of the quality of accounting information could affect the cost of equity capital. So I boldly guess the ownership structure and the cost of equity capital is affected by the quality of accounting information as a mediator.For the majority of ordinary investors, the financial information of the listed companies which is disclosed out is the most convenient and important channel to understand the enterprise’s financial condition and operating results. The economic situation changes rapidly in today’s society, so investors pay attention to corporate announcements all the time. Every announcement will have an impact on investors’ decisions. The quality of accounting information has a direct influence on investors’ perceptions of the company, high quality information can effectively reduce the investors’ prediction risk, then reduce the rate of the investors’required return. In this way it allows the companies to reduce the cost of equity capital. In view of this, the author thinks that the quality of accounting information is the main way in which the company’s internal governance level affects the cost of equity capital. Existing researches show that better ownership structure can effectively improve the quality of accounting information. The proportion of shareholders are one of the major factors. When the ownership structure is dispersed, ownership concentration contributes to strengthening the supervision and management of the controlling shareholders to the company. It helps to improve the company’s accounting information quality. But when the ownership structure is more concentrated, controlling shareholders may take advantage of the power in control to gain some private interests through financial frauds. If the company has several large shareholders which can supervise the controlling shareholders, the accounting information quality could be guaranteed. So the author thinks raise the ownership concentration degree or the equity balance degree can improve the quality of accounting information, then reduce the cost of equity capital.Solving the financing problem of the enterprises cannot be done overnight. This article discusses how to solve the problem of internal and external information asymmetry in enterprise by improving the ownership structure, then enhance investors’protection efforts and reduce direct external financing costs of the company. This article can help us to research how to solve the financing problem of the company.This article contains five parts:Part Ⅰ:The brief introduction of this article. This part elaborates this article’s background firstly, then it introduce its significance and motivation. It also illustrates this paper’s main content, the structure, and the research method. At last, it indicates this article’s contributions and inadequacies.Part Ⅱ:The review of the literature. This part elaborates relational literature about the research on the relationship between the ownership structure and the quality of the accounting information, also the research on the relationship between the quality of accounting information and the cost of equity capital. At last it summarizes the research on the relationship among the three factors.Part Ⅲ:Theoretical analysis. This part elaborates the theoretical analysis of the three how to affect each other. It further discusses how the ownership structure affect the cost of equity capital through the quality of accounting information as a mediator. This article tries to put ownership structure, the quality of accounting information and the cost of equity capital into a system to discuss. This part also lay a theoretical foundation for the following empirical study.Part Ⅳ:Empirical study. This part elaborates the descriptive statistics of all the data in this article. Then it uses the method of empirical analysis to test the relationship among ownership concentration degree (or the equity balance degree), the quality of accounting information and the cost of equity capital. At last it also test the mediating effect of the quality of accounting information. The results are consistent with expectations.Part Ⅴ:Conclusions and suggestions. Based on the theoretical analysis and the empirical analysis, this part puts forward corresponding suggestions on how to solve the enterprises’ financing problems. Finally, it puts forward some prospects for further studies.This article makes some contributions:(1)This article use the asymmetric information theory as the main theory to elaborate how the ownership structure affect the cost of equity capital through the quality of accounting information as a mediator. The author thinks that raise the ownership concentration degree or the equity balance degree can improve the quality of accounting information, then reduce the cost of equity capital. It uses the empirical method to verify the author’s hypothesis, at last it gives some recommendations for the managers of the enterprises.(2)In this paper, the author considers the measure of the ownership structure from multi-dimensional learnings. Compared with the previous one-dimensional analysis this article is more comprehensive and detailed, and hope to give a more specific and detailed recommendation to optimize the ownership structure.(3)This article use the Jones’ model as the measure of the quality of accounting information instead of the use of the evaluation results of the listed corporation information disclosure in Shenzhen. Because the author thinks the Jones’ model is more substantive, as the evaluation results are just normally. The quality of accounting information needs more attention for its substantive, so using the Jones’ model is more rational.(4)This paper does a specific empirical research in the small and medium board listed companies, and hope to give a more express recommendation for their financing problems.At the same time, the writer doesn’t have enough time and the ability is limited, so it also has some inadequacies:(1)Because this paper needs a specific empirical research in the small and medium board listed companies, and only the Shenzhen Stock Exchange distinguish the main board and the small and medium board, I just use the data of A-share listed companies in Shenzhen instead of all A-share listed companies. It is likely to affect its accuracy.(2)This paper’s focal point is that raise the ownership concentration degree and raise the equity balance degree which is better to reduce the cost of equity capital. So it doesn’t consider other influences of the ownership structure.(3)There are many methods to measure the quality of accounting information, it only use one common and more exact way. This may affect its generally applicable.