Voluntary disclosure and cost of equity capital

Abstract

Based on the differences of the degree of the government intervention in the enterprise in China's emerging market, we studied the impact of marketization process on the relationship between voluntary disclosure and cost of equity capital. We found that the marketization process strengthened the negative correlation between voluntary disclosure and the cost of equity capital. Furthermore, in the region of lower marketization progress, being affected by strong government intervention, the state-owned listed companies showed a lower correlation with voluntarily disclose and the cost of equity capital than the non-state-owned listed companies. Conversely, in the region with higher marketization progress, government would reduce the intervention in the enterprise, because of the greater flexibility to intervention, the non-state-owned listed companies would reduce more cost of equity capital than the state-owned listed companies through voluntary disclosure.