The Positive Study On The Influencing Factors Of Cost Of Equity Capital In Electric Power Listed Companies

The electric power industry is an important basic energy industry in the national economy. It not only provides support for the healthy development of all industries in the national economy, but also has great significance for the improvement of people’s living standards. It holds an extremely important position in the national economy. In recent years, China’s electricity demand is increasing quickly with the rapid economic growth. The healthy development of the electric power sector is crucial for the national economy. The sources of electric power sector’s capital were mainly self-financing and domestic loans. But in recent years, as the government encourages private capital and foreign capital to involve in the electric power construction in the forms of sole proprietorship, joint venture, project financing, etc., the sources of electric power industry capital have increasingly become diversified, which provides a good platform for the power company’s financing. For this reason, it is of great necessity to research the influencing factors of the cost of equity capital of electric power listed companies and to provide practical policy recommendations for the electric power company’s financing.In this thesis, we mainly analyze eight factors that may have a significant impact on electric power company’s cost of equity capital according to electric power industry’s characteristics. The thesis selects the up-to-date A-share electric power listed companies’ data, and uses factor analysis and multiple linear regression simultaneously as empirical research method, trying to find the main factors affecting the electric power industry listed company’s cost of equity capital. This thesis can be divided into six parts, and the specific structure is as follows:The first part is the introduction. The introduction part introduces the motivation and significance of the research, details and methods of the research, and innovations of the research.The second part is the literature summary. The literature summary launches from two aspects, the estimation models of the cost of equity capital and the influencing factors of the cost of equity capital. The summary of the estimation models contain ex-post estimation models and ex-ante estimation models. In addition, in order to seek theoretical support for our estimation model select, the studies of the applicability of the models in Chinese capital market are included. The summary of the influencing factors of the cost of equity capital unfold from single-factor and multi-factor two angles. Finally, we comment the existed studies, discuss the problems and limitations of these studies, and explore inspirations for our study.The third part is about the electric power sector’s characteristics and actuality This part introduces the electric power sector’s characteristics and present development situation.The fourth part is the theoretical analysis. This part first introduces the basic theories which are used to analyze the influencing factors of the cost of the equity capital. The theories include risk compensation theory, asymmetric information theory and agency theory. After that, we specifically analyze the influencing factors of the cost of equity capital of the companies in electric power sector from non-corporate level and corporate level two aspects.The fifth part is the empirical analysis. This part first introduces the empirical research design of this thesis, including the estimation models of the cost of equity capital, explanatory variables and research hypothesis, control variables, and the samples of the research. Next, the results of descriptive statistics, factor analysis and multiple linear regression are presented and discussed.The sixth part is the conclusions and suggestions. This part first draws conclusions of this study. According to the obtained conclusions, we next make some suggestions for electric power company’s management practices and government policies’ making.The thesis extracts five main factors from kinds of influencing factors through factor analysis. Research findings show that the ownership structure factor and profitability factor are the main factors affecting the cost of equity capital in electric power sector. To reduce the cost of equity capital, electric power companies should make efforts at these two aspects.The innovations of this thesis have three aspects:first, choosing to study only one sector-electric power sector’s influencing factors of cost of equity capital, can eliminate noise interference from other sectors, and ensure the conclusions drawn for the electric power industry are more credible and instructive. Second, according to the up-to-date studies about the applicability of the estimation models of the cost of equity capital in Chinese capital market, we choose PEG model to estimate the cost of equity capital, which guarantees accurate conclusions. Third, the thesis adopted both factor analysis and multiple linear regression as empirical research methods, which can not only attenuate the correlation between variables, but also find the main factors affecting the cost of equity capital in electric power sector.