Religious atmosphere and the cost of equity capital:Evidence from China

The cost of equity capital(ICC)is a crucial component of investment decisions and corporate performance evaluations.This study explores the effect of a region’s religious atmosphere on ICC and finds that ICC tends to be lower when stronger religious atmosphere is created.We further use the mediation effect method to clarify the specific channel through which religious atmosphere reduces ICC,and find that earnings quality,corporate investment efficiency and corporate social responsibility partially mediate the effect of religious atmosphere on ICC.Moreover,the relationship between religious atmosphere and ICC is more pronounced in firms with stronger external law environments and higher audit quality,indicating that formal institutions and religious tradition complement each other.

Voluntary Disclosure of Auditors＇ Report on Internal Control： Firm Characteristics and Economic Consequences

Using propensity score matching （PSM） and the difference-in- difference （DID） approach, this paper explores the characteristics of listed Chinese firms that voluntarily disclose auditors＇ reports on internal control and the economic consequences. Using a sample of non-financial firms listed on the main boards of the Shanghai Stock Exchange and the Shenzhen Stock Exchange between 2006 and 2010, we find that firms are more likely to voluntarily disclose their auditors＇ reports on internal control if they have higher state ownership, lower managerial ownership, sanction records, audit committees, non-Big Four auditors as their auditors of annual financial reports, unqualified auditors＇ opinions on financial reports, less board independence, after controlling for firm size, liabilities, performance, and history. Moreover, as compared to a control group that exhibits similar characteristics, firms that voluntarily disclose auditors＇ reports on internal control are associated with positive earnings quality and negative cost of equity capital.