Institutional Shareholding,quality Of Internal Control And Cost Of Equity Capital

As an important index,the cost of equity capital penetrates into every activity of enterprise management.With the development of market economy,enterprises have spare efforts to focus on how to reduce the cost of equity capital.After decades of development,the research on the cost of equity capital is also very fruitful,including the internal control quality and institutional investors.As early as the 18 th century,the idea of internal control had been born.In recent years,China's regulatory authorities' requirements for internal control information have been increasing year by year.From the original voluntary disclosure system to the compulsory disclosure system,we can see the importance of it.As an effective external supervision system,institutional investors can play an active role in corporate governance and supervise the management and business activities of the company.This paper intends to consider the influence of two factors on the cost of equity capital,which is also the issue of this paper.This paper is based on the principal-agent theory and information transmission theory,studies the relationship between the quality of internal control and the cost of equity capital.High quality internal control can effectively restrain the adverse consequences of principal-agent behavior and reduce the operational risk of enterprises;disclosure of high-quality internal control information can transfer positive information to others and ease the difficulty of financing,so as to reduce the cost of equity capital.Secondly,consider the relationship between institutional investors and the cost of equity capital.Institutional investors play the role of supervisors,respond to internal and external control system,jointly affect the corporate governance behavior,and effectively reduce the cost of equity capital through corporate governance.Finally,based on the study of internal control quality and institutional investors,considering the three roles,whether the expected results can be achieved.On the basis of theoretical analysis,through the construction of relevant research models and research hypotheses,taking the data of 2743 listed companies in 2014-2018 as a sample,studys with a combination of theoretical and empirical methods and draw the following conclusions:(1)with the improvement of internal control,the cost of equity capital decreases;(2)with the increase of institutional shareholding ratio,the cost of equity capital also shows a downward trend.(3)Institutional ownership can strengthen the negative correlation between the quality of internal control and the cost of equity capital.After the analysis of the empirical results,the paper finally puts forward the corresponding suggestions,pointing out the shortcomings in the research process and the possible ways to make up for them in the future.