Investor Sentiment, Institutional Investors and Corporate Innovation Investment <br/>—Evidence with Different Ownership Structure from China — Oak Academic Publishing
Research ArticleOpen AccessGoogle Scholar indexed
Investor Sentiment, Institutional Investors and Corporate Innovation Investment <br/>—Evidence with Different Ownership Structure from China
Business College of Shanxi University, Taiyuan, China
,
School of Economics and Management, Shanxi University, Taiyuan, China
1 Business College of Shanxi University, Taiyuan, China
2 School of Economics and Management, Shanxi University, Taiyuan, China
This paper investigates the relation between investor sentiment and firm innovation investment in China, and explores the intermediary role of institutional investors. We find that the impact of investor sentiment on innovation investment is quite different between state-owned enterprises (SOEs) and private-owned enterprises (POEs). Investor sentiment promotes the innovation investment of POEs, while inhibits SOEs. We also find that institutional investors play a positive intermediary facilitating role in POEs, mainly contributing by supervisor independent institutional investors. We do not find any role for institutional investors in SOEs.
Acharya, V., & Lambrecht, B. M. (2015). A Theory of Income Smoothing When Insiders Know More than Outsiders. Review of Financial Studies, 28, 2534-2574. https://doi.org/10.1093/rfs/hhv026
Admati, A. R., & Pfleiderer, P. (2009). The “Wall Street Walk” and Shareholder Activism: Exit as a Form of Voice. Review of Financial Studies, 22, 2645-2685. https://doi.org/10.1093/rfs/hhp037
Aghion, P., Reenen, J. V., & Zingales, L. (2013). Innovation and Institutional Ownership. American Economic Review, 103, 277-304. https://doi.org/10.1257/aer.103.1.277
Amihud, Y. (2002). Illiquidity and Stock Returns: Cross-Section and Time-Series Effects. Journal of Financial Markets, 5, 31-56. https://doi.org/10.1016/S1386-4181(01)00024-6
Baker, M., & Stein, J. (2004). Market Liquidity as a Sentiment Indicator. Journal of Financial Markets, 7, 271-299. https://doi.org/10.1016/j.finmar.2003.11.005
Baker, M., & Wurgler, J. (2006). Investor Sentiment and the Cross-Section of Stock Returns. Journal of Finance, 61, 1645-1680. https://doi.org/10.1111/j.1540-6261.2006.00885.x
Baker, M., Stein, J., & Wurgler, J. (2003). When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms. Quarterly Journal of Economics, 118, 969-1005. https://doi.org/10.1162/00335530360698478
Bamber, L., Jiang, J., & Wang, I. (2010). What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure. The Accounting Review, 85, 1131-1162. https://doi.org/10.2308/accr.2010.85.4.1131
Barberis, N., Shleifer, A., & Vishny, R. (1998). A Model of Investor Sentiment. Journal of Financial Economics, 49, 307-343. https://doi.org/10.1016/S0304-405X(98)00027-0
Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic, and Statistical Considerations. Journal of Personality and Social Psychology, 51, 1173-1182. https://doi.org/10.1037/0022-3514.51.6.1173
Bertrand, M., & Schoar, A. (2003). Managing with Style: The Effect of Managers on Firm Policies. Quarterly Journal of Economics, 118, 1169-1208. https://doi.org/10.1162/003355303322552775
Black, F. (1986). Noise. Journal of Finance, 41, 529-543. https://doi.org/10.1111/j.1540-6261.1986.tb04513.x
Bolton, P., Chen, H., & Wang, N. (2011). A Unified Theory of Tobin’s q, Corporate Investment, Financing, and Risk Management. The Journal of Finance, 66, 1545-1578. https://doi.org/10.1111/j.1540-6261.2011.01681.x
Bolton, P., Chen, H., & Wang, N. (2013). Market Timing, Investment, and Risk Management. Journal of Financial Economics, 109, 40-62. https://doi.org/10.1016/j.jfineco.2013.02.006
Brav, A., Jiang, W., Ma, S., & Tian, X. (2018). How Does Hedge Fund Activism Reshape Corporate Innovation? Journal of Financial Economics, 130, 237-264. https://doi.org/10.1016/j.jfineco.2018.06.012
Bushee, B. (1998). The Influence of Institutional Investors on Myopic R&D Investment Behavior. The Accounting Review, 73, 305-333.
Campbell, J. Y., Grossman, S. J., & Wang, J. (1993). Trading Volume and Serial Correlation in Stock Returns. The Quarterly Journal of Economics, 108, 905-939. https://doi.org/10.2307/2118454
Chang, X., Tam, L., Tan, T. J., & Wong, G. (2007). The Real Impact of Stock Market Mispricing: Evidence from Australia. Pacific-Basin Finance Journal, 15, 388-408. https://doi.org/10.1016/j.pacfin.2006.06.003
Chen, S., Sun, Z., Tang, S., & Wu, D. (2011). Government Intervention and Investment Efficiency: Evidence from China. Journal of Corporate Finance, 17, 259-271. https://doi.org/10.1016/j.jcorpfin.2010.08.004
Chen, X., Harford, J., & Li, K. (2007). Monitoring: Which Institutions Matter. Journal of Financial Economics, 86, 279-305. https://doi.org/10.1016/j.jfineco.2006.09.005
Chirinko, B., Chirinko, R., & Schaller, H. (2001). Business Fixed Investment and “Bubbles”: The Japanese Case. American Economic Review, 91, 663-680. https://doi.org/10.1257/aer.91.3.663
Chirinko, R. S., & Schaller, H. (2006). Fundamentals, Mispricing and Investment: The Real Story. Working Paper.
Coles, J. L., Daniel, N. D., & Naveen, L. (2006). Managerial Incentives and Risk-Taking. Journal of Financial Economics, 79, 431-468. https://doi.org/10.1016/j.jfineco.2004.09.004
Cooper, R., & Ejarque, J. (2003). Financial Frictions and Investment: Requiem in Q. Review of Economic Dynamics, 6, 710-728. https://doi.org/10.1016/j.red.2003.08.001
De Long, J. B., Shleifer, A., Summers, L. H. et al. (1990). Noise Trader Risk in Financial Markets. Journal of Political Economy, 98, 703-738. https://doi.org/10.1086/261703
Ding, S., Knight, J., & Zhang, X. (2019). Does China Overinvest? Evidence from a Panel of Chinese Firms. The European Journal of Finance, 25, 489-507. https://doi.org/10.1080/1351847X.2016.1211546
Dong, M., Hirshleifer, D. A., & Teoh, S. H. (2007). Stock Market Misvaluation and Corporate Investment. SSRN Electronic Journal, 25, 3645-3683. https://doi.org/10.2139/ssrn.972765
Du, J., & Ren, D. (2019). Does the Liquidity of Stocks of NEEQ Enterprises Inhibit Technological Innovation? Jinan Journal (Philosophy & Social Science Edition), 41, 107-118. (In Chinese)
Edmans, A., & Manso, G. (2011). Governance through Trading and Intervention: A Theory of multiple Blockholders. Review of Financial Studies, 24, 2395-2428. https://doi.org/10.1093/rfs/hhq145
Edmans, A., Fang, V., & Zur, E. (2013). The Effect of Liquidity on Governance. Review of Financial Studies, 26, 1443-1482. https://doi.org/10.1093/rfs/hht012
Edmans, A., Gabaix, X., & Landier, A. (2009). A Multiplicative Model of Optimal CEO Incentives in Market Equilibrium. Review of Financial Studies, 22, 4880-4919. https://doi.org/10.1093/rfs/hhn117
Faccio, M. (2006). Politically Connected Firms. The American Economic Review, 96, 369-386. https://doi.org/10.1257/000282806776157704
Fang, V. W., Noe, T. H., & Tice, S. (2009). Stock Market Liquidity and Firm Value. Journal of Financial Economics, 94, 150-169. https://doi.org/10.1016/j.jfineco.2008.08.007
Gilchrist, S., Himmelberg, C. P., & Huberman, G. (2005). Do Stock Price Bubbles Influence Corporate Investment. Journal of Monetary Economics, 52, 805-827. https://doi.org/10.1016/j.jmoneco.2005.03.003
Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The Economic Implications of Corporate Financial Reporting. Journal of Accounting and Economics, 40, 3-73. https://doi.org/10.1016/j.jacceco.2005.01.002
Graham, J., Li, S., & Qiu, J. (2012). Managerial Attributes and Executive Compensation. Review of Financial Studies, 25, 144-186. https://doi.org/10.1093/rfs/hhr076
Graves, S. (1988). Institutional Ownership and Corporate R&D in the Computer Industry. Academy of Management Journal, 31, 417-428. https://doi.org/10.5465/256557
He, W., & Kyaw, N. A. (2018). Ownership Structure and Investment Decisions of Chinese SOEs. Research in International Business and Finance, 43, 48-57. https://doi.org/10.1016/j.ribaf.2017.07.165
Kumar, P., & Li, D. (2016). Capital Investment, Innovative Capacity, and Stock Returns. Journal of Finance, 71, 2059-2094. https://doi.org/10.1111/jofi.12419
Kyle, A., & Vila, J. (1991). Noise Trading and Takeovers. Rand Journal of Economics, 22, 54-71.
Lee, C., Shleifer, A., & Thaler, R. H. (1991). Investor Sentiment and the Close-End Fund Puzzle. The Journal of Finance, 46, 75-109. https://doi.org/10.1111/j.1540-6261.1991.tb03746.x
Luong, H., Moshirian, F., Nguyen, L. et al. (2017). How Do Foreign Institutional Investors Enhance Firm Innovation? Journal of Financial and Quantitative Analysis, 52, 1449-1490. https://doi.org/10.1017/S0022109017000497
Lv, C., Zhen, H., Yan, M., & Xu, J. (2009). The Design for Listed Companies’ System of Stimulation by Stock Option and Purchase: Is It an Incentive or Welfare? Management World, No. 9, 133-147. (In Chinese)
Maug, E. (1998). Large Shareholders as Monitors: Is There a Trade-Off between Liquidity and Control? Journal of Finance, 53, 65-98. https://doi.org/10.1111/0022-1082.35053
Panageas, S. (2005). The Neoclassical Theory of Investment in Speculative Markets. Working Paper. https://doi.org/10.2139/ssrn.720464
Polk, C., & Sapienza, P. (2004). The Real Effects of Investor Sentiment. Working Paper. https://doi.org/10.3386/w10563
Polk, C., & Sapienza, P. (2009). The Stock Market and Corporate Investment: A Test of Catering Theory. Review of Financial Studies, 22, 187-217. https://doi.org/10.1093/rfs/hhn030
Porter, M. (1992). Capital Choices: Changing the Way America Invests in Industry. Boston, MA: Council on Competitiveness/Harvard Business School.
Shen, J., Firth, M., & Poon, W. P. H. (2016). Credit Expansion, Corporate Finance and Overinvestment: Recent Evidence from China. Pacific-Basin Finance Journal, 39, 16-27. https://doi.org/10.1016/j.pacfin.2016.05.004
Stein, J. C. (1989). Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior. Quarterly Journal of Economics, 104, 655-669. https://doi.org/10.2307/2937861
Sunder, J., Sunder, S. V., & Zhang, J. (2017). Pilot CEOs and Corporate Innovation. Journal of Financial Economics, 123, 209-224. https://doi.org/10.1016/j.jfineco.2016.11.002
Wang, J., & Sun, J. (2004). Stock Market Returns, Volatility and the Role of Investor Sentiment in China. Economic Research Journal, No. 10, 75-83. (In Chinese)
Zhang, X., Xue, H., Zhang, Y., & Ding, S. (2020). Growth Opportunities or Cash Flow Drives Innovative Investment—Evidence with Different Ownership Structure from China. Emerging Markets Finance & Trade, 56, 2491-2508. https://doi.org/10.1080/1540496X.2019.1668268