Environmental Uncertainty, Institutional Investor Holdings And The Cost Of Equity Capital

From the perspective of deepening the reform of the financial system,the 19 th National Congress of the Communist Party of China put forward new requirements for enhancing the economic capacity of financial services,increasing the proportion of direct financing,and promoting the healthy development of multi-level capital markets.Capital cost,as an important concept of corporate finance,is an important basis for corporate financing decisions,an important criterion for evaluating and selecting investment projects,and a critical benchmark for measuring corporate financial efficiency.Whether in practice or in theory,capital cost is a central issue.How to effectively control the cost of equity capital determines whether the company can be based on the capital market.In the context of the new economic normal,enterprises face a more complex environment.To adapt,grasp and lead the new normal,enterprises must first correctly understand their own environment and its changes.The business environment faced by each enterprise will be different due to different characteristics of the company and corporate governance.These differences lead to information asymmetry among stakeholders,and shareholders will raise a higher return on investment for enterprises.Therefore,it is necessary to explore the impact of environmental uncertainty on the cost of equity capital of enterprises from a specific environmental perspective.In addition,in the context of ultra-conventional institutional investors,Chinese institutional investors have gradually grown in the capital market,and their corporate governance has become more and more valuable,and the latest G20-OECD Corporate Governance Guidelines(2015)also pointed out that good corporate governance will convince shareholders and other stakeholders that their rights are protected and reduce the cost of corporate equity capital.Therefore,this paper also studies whether the institutional investors' shareholdings can suppress the relationship between environmental uncertainty and the cost of equity capital.This paper uses the 2013-2017 A-share data of listed companies in China to empirically analyze the impact of environmental uncertainty and institutional investors' shareholding on the cost of equity capital.Through analysis,it is found that in China's capital market,the higher the degree of environmental uncertainty faced by enterprises,the higher the cost of equity capital.The involvement of institutional investors can suppress the positive correlation between environmental uncertainty and the cost of equity capital.And this role is more obvious in state-owned enterprises and enterprises with higher degree of marketization.In view of the above findings,this paper proposes that institutional investors should also pay attention to the improvement of their own governance environment while actively responding to the policy call for development;enterprises can actively respond to environmental uncertainty by reducing risk awareness and adopting risk transfer means to reduce equity capital.Costs;relevant departments such as the government and securities supervision should further optimize financing channels,broaden financing channels,encourage balanced development of various institutional investors,strengthen incentive mechanisms,and correctly guide investor behavior.