Research For Influences Of Reverse Merger Whole Listing On The Cost Of Equity

In recent years,the whole listing of the listing corporation is relatively concentrated and gradually increased in Chinese domestic capital market.However,what impact will the whole listing of the reverse takeover have on the long-term efficiency of the enterprise,and whether it helps to reduce the cost of equity ? This paper focus on the problem mentioned above,and further analyzes and discusses the problem.Mainstream theoretical and empirical studies show,the quality of information disclosure is negatively correlated with the cost of equity,the disclosure of information is essential to both the investor and lender.Investors,because of the information asymmetry,can not predict the future accurately and may bear the risk.As a result,investors will improve the expected rate of return and increase the cost of equity capital.However,these studies still remain controversial in developing countries.With China's capital market continuously regulated and improved,higher quality of information disclosure is required and much attention has been paid by the regulators to raise the disclosure requirements for the listed companies.The information disclosure in China's capital market gradually standardized.From the spin-off to whole listing,the entire group was placed under the supervision of the market,which is conducive to raise the level of corporate governance,and thereby contributes to enhancing the quality of information disclosure.Therefore,we assume that the whole listing by means of reverse acquisition could reduce the cost of equity.In this paper,we examine the samples of China's securities market,ranging from 2006 to 2013,by means of diffirence-in-difference model and do empirical analysis on the impact of whole listing reverse merger made on the cost of equity.The figure shows that,after whole listing,as the level of corporate governance enhanced and the quality of information disclosure improved,the information asymmetry decreased.Consequently,the cost of equity decreased in a certain degree.According to the conclusion mentioned above,this article puts forward the following suggestions.First,encourage large Chinese enterprises to take part in the whole listingwhich is a promising event to raise the level of corporation governance and to improve the disclosure.Second,measures should be taken by the government to establish and improve the market norms,which help promote the efficiency of capital market.Third,for the whole listing enterprise,professional institutions should establish the evaluation system to measure the level of information transparency and help them to make more effective investment decisions.Finally,investors are advised to pay attention to the whole listing companies.Meanwhile,in order to make rational value investing,investors should keep enriching their mind.