Ownership Concentration Under Different Industry Competition Degree Impact On The Cost Of Equity Financing

Cost of equity financing is the important part of the cost of capital,which is not only related to the performance evaluation,investment and financing decision-making,corporate growth,etc.,but also affect the cash flow and efficiency of resource allocation in the stock market,equity financing cost is an important reference standard of management of investment and financing decisions.When the company's economic profits controlled,reduce the cost of equity financing is an effective way to realize profits maximization.As the capital demander,the company's equity financing cost is the expense of the possessive capital,the more expensive the cost,the higher the cost of using capital;however,standing in the perspective of investors,the equity financing cost is investors' required bonus,the higher the required bonus,the higher risk of investing stock.Therefore,the research of the company's equity financing cost factors becomes a hot issue in the field of financial management.Through analyzing the existing research,we found that foreign research achievements of equity financing cost was relatively abundant,while in our country the issue become the focus of theoretical and empirical research was in recent years.At present most scholars study focused on the quality of information disclosure,stock liquidity and investor protection effect on the cost of equity financing,less attention to a front variable—the ownership concentration.As the basis of the company's internal governance,ownership concentration has significant influence on information disclosure quality,stock liquidity and investor protection.In view of this,we chose the three main factors as a bridge and explore the ownership concentration on the mechanism of the equity financing cost.In addition,the company internal governance mechanism and external governance mechanism is not exist in isolation from each other,the effect of ownership concentration on corporate governance is affected by the industry competition environment,only from the angle of single factors,easy to cause the results one-sidedness,which is not conducive to managers' investment and financing decisions.The previous studies have shown that companies in the same industry with similar competition environment,investment opportunities and growth,they have similar production curves and supply curves,and little difference in financing cost and even financing structure(Morse and Shive,2008),the risk of investors is expected to be more convergence;however,between different industries,the competition strength,investment risks have difference,the bonus of investors required is often not the same.Therefore,we further research whether the relationship between ownership concentration and equity financing cost is affected by different degree of competition in the industry,to the government's industrial development policy and company managers put forward some advice for financial decision-making.Based on the a-share listed companies from 2010 to 2013,we analyzes ownership concentration under different industry competition degree impact on the cost of equity financing.Research results indicate that:(1)the listed companies in our country under the condition of common equity concentration,ownership concentration and equity financing costs has significantly positive correlation;(2)relative to the highly competitive industry,in the low competitive industries,the effect of the company's equity concentration on the cost of equity financing is more significant;(3)External competition environment as the complement of internal governance structure,reduces the ownership concentration on the influence of the cost of equity financing,other factors such as B/M,the company size has significant influence to company's equity financing costs.In this paper,the study found that means,optimizing equity structure,improve the transparency of ownership concentration high company is necessary;Furthermore,introduction of external competition mechanism in low competitive industries can effectively weaken the influence of the controlling shareholders.