High-Interest Entrusted Ioans,Earnings Persistence And Cost Of Equity Capita

As an important business of shadow banking,entrusted loans are one of the important factors leading to business operation and financial risks,which will have an important impact on the company's earnings quality and equity capital cost.Based on the persistence of earnings,this paper empirically examines the effect of high-interest entrusted loans on the persistence of earnings and the cost of equity refinancing(i.e.the cost of equity capital)by taking the listed companies of Shanghai and Shenzhen A shares in China from 2009 to 2016 as the research subjects and collecting and collating the data of entrusted loans manually.The study finds that high-interest principal loan is significantly positively correlated with the principal's equity capital cost and negatively correlated with earnings persistence,and earnings persistence plays an intermediary role in the impact mechanism of high-interest principal loan and equity capital cost.Specifically,because of the unsustainable project,credit risk and market risk,the high-interest entrusted loan business will cause the persistence of the principal's surplus to decrease,and in the case of information asymmetry,it will lead to the increase of the cost of equity capital.To some extent,this conclusion illustrates the negative effects of entrusted loans,which can provide empirical evidence for the macro-control of investment and financing decision-making and policy-making departments.Therefore,in light of the policy background of strengthening financial supervision at the present stage,this paper puts forward some countermeasures and suggestions:enterprises should establish risk awareness,focus on the long-term,prudently carry out entrusted loan business.especially high-interest entrusted loan business,rationally avoid policy risks and financial risks;increase enterprise innovation and actively seek new growth points;borrowers should strengthen information disclosure and enhance credit The quality of interest disclosure should be improved to reduce the degree of information asymmetry;the positive role of commercial banks should be brought into play to reduce the risk of entrusted loans;and the financial supervision departments should improve the construction of relevant laws and regulations on entrusted loans,strengthen supervision and guidance,form a regulatory synergy,and promote the healthy development of entrusted loans.