Pyramid Structure, Investor Relations, and the Cost of Equity Capital

The purpose of this paper is to investigate whether investor relations can reduce the cost of equity capital under the pyramid structure in China. This paper reviews literature and establishes regression models to examine the relationship among controlling shareholders, investor relations and the cost of equity capital. As expected, the paper finds that the better the investor relations level, the lower the level of equity cost, even in the companies with pyramid structure. The current paper contributes to the literature by exploring the way to reduce the cost of equity capital and improving the investor relations level under the background of a Chinese pyramid structure.