The Information content of annual report and cost of equity capital: Based on Text Vectorization Method

Zhan Shi and Chongjun Fan

Finance Research Letters, 2024, vol. 70, issue C

Abstract: Taking Chinese A-share listed companies in Shanghai and Shenzhen from 2017 to 2021 as the research sample, the method of text vectorization is used to construct an index of information content of annual report, and empirically test the impact of information content on the cost of equity capital. The results show that the information content is negatively related to the cost of equity capital, and the degree of information asymmetry plays a mediating role between them. This article is the first to verify the effect of information content on the cost of equity capital, and it is expected to provide theoretical guidance for regulators, enterprises and investors.

Keywords: Informative content; Cost of equity capital; Text vectorization; Annual report (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324012893

DOI: 10.1016/j.frl.2024.106260

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