Effect of Financial Reporting Quality on the Cost of Capital and Investment in China

DOI

10.2991/978-94-6463-098-5_24How to use a DOI?

Keywords

Financial Reporting Quality; Cost of Capital; Investment

Abstract

Financial reporting helps reduce information asymmetry between external personnel and the internal members of the company. A high-quality financial reporting can help people better understand the company's business operations and financial performance and make the best investment decisions. Since the financial reports in the U.S. can reduce the cost of capital, the purpose of this paper is to look for the possibility that any financial reporting could have effects on Chinese companies. The data samples in this paper include thirty listed Chinese companies from 2000 to 2020. By comparing these Chinese companies’ data, the statistics show that high-quality financial reporting could not reduce the cost of capital or bring more investment income to Chinese companies. This result may be due to language barriers and different investment habits. Moreover, the auditing system and reporting standards may vary for different listed companies in Asia and Europe. This paper will further analyze why the conclusion drawn from the U.S. companies’ data may not apply to Chinese companies. In conclusion, using the initial public offering of equity securities (IPO), research, and analysis, financial statements have little impact on the cost of capital and investments. Also, due to the information asymmetry and different writers of prospectuses, the result from U.S. companies may not be applicable to Chinese businesses.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Rongfei Diao
AU  - Ziyou Wang
AU  - Fang Yuan
AU  - Qiwen Zhou
AU  - Danqi Liu
PY  - 2022
DA  - 2022/12/27
TI  - Effect of Financial Reporting Quality on the Cost of Capital and Investment in China
BT  - Proceedings of the 2022 4th International Conference on Economic Management and Cultural Industry (ICEMCI 2022)
PB  - Atlantis Press
SP  - 194
EP  - 203
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-098-5_24
DO  - 10.2991/978-94-6463-098-5_24
ID  - Diao2022
ER  -