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The Study on Quality of Information Disclosure and Corporate Financing Cost of Debt

Author: HuYu
Tutor: MaYongQiang
School: Southwestern University of Finance and Economics
Course: Financial Management
Keywords: Quality of information disclosure listed companies the cost ofdebt financing
CLC: F275
Type: Master's thesis
Year: 2013
Downloads: 102
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Abstract


Debt financing as one of the most important ways for external financing of our company, the cost of corporate debt financing has been a hot topic in financial research. This paper aims to research the relationship between quality of the information disclosure and corporate debt financing costs by empirical research methods. Because the asymmetry of information is the main reason for the mismatch of resources on the capital market, reducing information asymmetry will reduce the company’s debt financing constraints in theory. Many scholars launched a number of studies on the related areas of corporate finance under the circumstance of financial crisis, since the financial crisis sweeping the globe which outbreaks in2008. With the impact of the financial crisis, how will the relationship between corporate debt financing costs and quality of information disclosure changes still need to be discussed. This paper based on the comparison of2005-2011quarter economic data (before and after the financial crisis), to find out whether the quality of information disclosure will affect the company’s debt financing costs. What’s more, to find out in the context of the financial crisis, how the relationship will change.This study found that the listed companies with high quality of the information disclosure, the corporate debt financing costs will be lower. In general, the high quality of information disclosure will reduce information asymmetry which will help the bank to reduce the credit risk of a mismatch, and therefore reduce their lending rates.In the environment of the financial crisis, banks will increase the debt financing constraints, information asymmetry would enlarge the impact of this constraint behavior, thus making the impact on the company’s debt financing costs will increase.The follows is the main content of this paper:Chapter one is the introduction part. At the first, Ⅰ’ll present the main issues to be studied in this paper, and then briefly describe the background to the study, the purpose of the study, as well as the significance of the study. What’ more, I’ll make a brief introduction to the research content, research ideas and research framework. Finally, I’ll briefly elaborate the contribution of this article.Chapter two is the literature review section. First of all, I’ll take a overview of relevant literature on the definition and measurement of the cost of debt financing. Then take a brief review of the domestic and foreign scholars to define and measure the quality of information disclosure standard as well as its market reflects, follow with the recalling domestic and foreign scholars about the quality of information disclosure on the impact of debt financing costs briefly reviews the research results, as well as other influencing factors on the cost of debt financing literature review. At last, take a brief review of the literature above.Chapter three is about the theoretical basis and the research assumptions of the study. The first part is to analyze the theoretical basis for this paper from logical and theoretically provide the basis of the relationship between them. Starting from the theory of asymmetric information, and then analyze the impact of the quality of information disclosure in the cost of debt financing mechanism, combined with the impact of the financial crisis on the company’s debt financing, analysis of the quality of information disclosure of the company in the case of a financial crisis its cost of debt financing, Finally, make the assumptions based on the theories above.Chapter four is about the empirical research design. Select companies listed on the Main Board of the Shenzhen Stock Exchange from2005to the end of2011in CSMAR database, annual data is selected as the sample, making regression analysis and descriptive statistics, and design are explanatory variables and the explanatory variables. Which the explanatory variable is set to the cost of debt financing, this variable in determining indicators combined research experience of the foreign scholars and China’s actual conditions to determine the foreign scholars generally used is the interest rate and the same period of the bonds outstanding Treasury rates difference is the indicator of the cost of debt financing, but due to the imperfect development of the corporate bond market in the country, the use of this indicator is obviously not suitable for China’s national conditions, many scholars have used interest expense rate, comprehensive set the length of the domestic and international indicators, this article the indicators as the difference between the interest expense rate and bond yields; Explanatory variables using the Shenzhen Stock Exchange on the quality of information disclosure of listed companies’ information disclosure quality rating as an alternative variable, and the quality of information disclosure by the financial crisis as a dummy variable interaction in order to examine the financial crisis on the quality of information disclosure and the cost of debt financing the relationship between.Chapter five is about the empirical results and regression analysis. At first analyzes the descriptive statistics of the study variables, variables related test, after the use of regression analysis to study the impact of the quality of information disclosure on the cost of debt financing, and the results of the robustness test, the final analysis based on empirical results of two by the relationship.Chapter six is the conclusion. Through the above analysis, this chapter will put forward corresponding conclusions, as well as follow-up studies should be concerned. Finally, according to the analysis of the results of the company, creditors, regulators make relevant recommendations.This article will use the quarterly data of the main board listed companies in Shenzhen and the companies’ information disclosure quality rating published by the Shenzhen Stock Exchange, to do empirical research of the impact of company information disclosure quality on corporate debt financing costs. I use the Shenzhen Stock Exchange of information disclosure quality evaluation as the variable of the quality of information disclosure, use the difference between the interest expense rates and bond yields as indicators to measure the cost of debt financing, to some extent, the design of these indicators reflect the actual present stage of corporate debt financing costs constitute by bank borrowings. Verifying the correlation between the cost of debt financing and the quality of information disclosure provides a theoretical basis and empirical basis to the follow-up study.The actual significance of this study are:(1) From the point of view of the company itself, learning from this study can effectively lower its cost of debt financing to provide a reference, and facing the serious impact of the financial crisis, we can find out that the more obvious observation to improve the quality of information disclosure to reduce the cost of debt financing;(2) From the point of view of creditors, the creditors can effectively reduce information asymmetry and debt side, can effectively avoid the risk of lending money;(3) From the regulators’ point of view, this study for our policy makers to learn from it in order to facilitate the development of the policy is conducive for both lenders and borrowers, and effectively improve the deploy efficiency of capital markets capital.

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