Does Other Comprehensive Income Affect The Cost Of Equity Capital?

Other comprehensive income belongs to the unrealized gains and losses,which cannot be confirmed in the profit and loss,and has the characteristics of unrealized and temporary.Therefore,whether other comprehensive income items should be included in the profit and loss and owner's equity is not only the contentious subject of the standard setting mechanism including the international accounting standards committee,but also a hot topic of concern in the theoretical and practical circles.The research on other comprehensive income is mainly focused on verifying whether it has value correlation,but the literature on the study of the management function of other comprehensive income based on the capital market environment of China is rarely and this provides a relatively novel and theoretical entry point for the research herein.Capital cost is an inevitable topic in financial management and corporate governance.It is not only an important basis for company to raise funds,but also has important reference value when making investment decisions with the company.A large number of studies have shown that there is a significant interest in equity financing in the Chinese market,and it has a direct relationship with the underlying institutional and policy background and the low cost of equity financing.In addition,some scholars have further explored the other reasons behind the equity financing preference from the perspective of the influence factors of equity capital cost,thus expanding the theoretical and empirical research on the cost of equity capital.To integrate the profit and loss and owner's equity information with its own unrealized and fluctuating characteristics contained in the concept of other comprehensive income,the profit and loss and the risk are one of the two salient features of the other comprehensive income,and on the other hand the important consideration of the equity capital cost pricing decision.Therefore,based on the continuous standard and perfect institutional background of other comprehensive income criteria,this paper takes the profit and loss and risk characteristics of other comprehensive income as the point of connection,and separately examines the profit and loss information contained in other comprehensive income listed in the income statement,as well as the impact of risk characteristics reflected by other comprehensive income fluctuations on equity capital cost.In addition,considering the characteristics of the company is also an important factor influencing the cost of equity capital,this paper introduces two indexes of accounting sensitivity and economic sensitivity,to examine the influence of the characteristics of the company on the relationship between other comprehensive income and equity capital cost.This article selects the 2010 to 2016,Shanghai and Shenzhen a-share main board listed companies as samples,and found that there is a significant negative correlation between the amount of other comprehensive income in the income statement and the cost of equity capital,while other comprehensive income fluctuations are positively correlated with the cost of equity capital.After considering the characteristics of the company,the higher the accounting sensitivity,the negative correlation between the amount of other comprehensive income in the income statement and the cost of equity capital is more obvious.The higher the economic sensitivity,the more obvious the positive correlation between the volatility of other comprehensive income and the cost of equity capital.