Study On Investor Attention,Earning Management And Resources Allocation Efficiency

The investor structure of stock market in China reflects the certain differences of stock market development lever between developed country and China.Until the 3rd quarter of 2015,the shareholding of retail investor in China occupied 41.58 percent of the negotiable share,without considering the short-term institution investor.This indicates the size of shareholding and the depth of impact of the investor who trade on the stock market frequently in China stock market has big differences with the developed countries.Otherwise,faced with the large number of the listed companies and the related information,limited attention and limited rationality make investor behave intationally.The research of behavior finance considers that the investor attention which affects the stock price is the antecedent conditions of market reaction.The existing theory and hypothesis explain the relationship between investor attention and the stock price,such as "price pressure hypothesis","neglected firm effect","excessive attention bring for weak performance " and "risk premium hypothesis".Meanwhile,the quantitative fund has achieved good investment performance using the special investment strategy which regards the investor attention as the key index.Nowdays,the lifting of the restricted stock,the finance demand from the stock issue market and the salary depending on stock price motivate the managers to carry out the market value management.Then,whether and how the stock price which is affected by investor attention affects the behavior of managers and the resource allocation indirectly is still unknown.Considering the seldom related reacearch achievement,it is of important significance to explore and empirically test how investor attention affects the the behavior of managers and the economic consequences.Based on the catering theory and the price pressure hypothesis,this paper constructs a research framework as "investor attention-earning management-cost of equity-investment efficiency".This paper empirically uses the data of A-share listed companies as research sample to test the affect of investor attention on the behavior of managers and the resource allocation.The full text is divided into six chapters,the main contents of each chapter are as follows:Chapter one:Introduction.This chapter mainly introduces the research background and motivation,research significance,research content,innovation and contribution.Chapter two:Literature Review.This chapter aims at reviewing literature which is related with investor attention,earning management,cost of equity or investment efficiency systematically and comprehensively.Chapter three:Investor Attention and Earning Management.This chapter use annual turnover and annual trade volume to measure the degree of investor attention,firstly empirically tests whether the degree of earning management is restained or facilitated under the external supervision or market pressure of investor attention.Then,tesing whether investor attention facilitate earning management upward.Besides,testing the moderating effect of analystor and the institution investor who provides or transmit information to retail investor,and what kind of the moderating effect is.Chapter four:Investor Attention,Earning Management and Cost of Equity.This chapter use annual turnover and annual trade volume to measure the degree of investor attention,firstly empirically tests the impact from investor attention to cost of equity.Secondly,testing whether earning management is an intermediary variable in the affecting process from investor attention to cost of equity and what kind of the intermediary is.Besides,testing the moderating effect of analystor and the institution investor who provides or transmit information to retail investor,and what kind of the moderating effect is.Chapter five:Investor Attention,Cost of Equity and Investment Efficiency.This chapter use annual turnover and annual trade volume to measure the degree of investor attention,firstly empirically tests the impact of investor attention to investment efficiency,including the positive effect on under-investment and the negative effect on over-investment.Secondly,testing whether cost of equity is an intermediary variable in the affecting process from investor attention to investment efficiency and what kind of the intermediary is.Besides,testing the moderating effect of analystor and the institution investor who provides or transmit information to retail investor,and what kind of the moderating effect is.Chapter six:Research Conclusion and Remarks.This chapter summaries the conclusions and discovery of the study,then points out the shortage and limitation,and discusses the research direction of the future at the end.The main conclusions of this study are as follows:First of all,the market pressure from investor attention affects the resource allocation efficiency by means of manager's behavior.In details,investor attention affects managers' behavior of earning management,accounting earning and stock price orderly.The stock price affects the equity financing ability of lised companies,and then affects the investment efficiency.In the process mentioned above,the earning management and the cost of equity work as partial intermediary variable.Secondly,investor attention results in the market pressure to the managers,and with the increasing degree of investor attention,the management carry out larger accrual earnings management to match the earning requirement of the investor.But,the managers don't become so myopic under the market pressure that they decrease the real earning management.Meanwhile,the managers tend to decrease negative earning management or increase positive earning management with the increasing degree of investor attention.Since the real earning management is harder to be recognized by investor than the accrual management,the sensibility of different kind methods of earning management to investor attention diversifies,that means the reacting coefficient from investor attention to accrual earning management is larger when the managers facing negative accrual earning management than the positive accrual earning management,and the reacting coefficient from investor attention to real earning management if larger when the managers facing posiative real earning management than the negative accrual earning management.Thirdly,with the increasing degree of investor attention,the purchase pressure on the stock market increases the liquidity of stock,reduces the transition cost,facilitates the rise of stock price,resulting in lower cost of equity.In the process mentioned above,the accounting earning increased in the short term by managers affects the equilibrium of the stock market,and changes the stock price.Fourth,under the market pressure,the managers have to take investor reaction on the stock market into consideration when they are facing with investment decision.In this situation,it motivates managers to cater to the investor,resulting in the increasing investment scale and over investment.In the process mentioned above,the decreased cost of equity means the stronger ability of equity financing and less degree of the potential equity financing restriction,that affect managers' making investment decision,facilitating over investment.Finally,the number of information is one of moderating effect factor in the research framework.This paper discusses the moderating effect of information and implements empirical tests,finding that with the increasing number of information,promoting affects from investor attention to manager behavior and resource allocation.The contribution and innovation mainly summary as the follows:Firstly,in the aspect of research content,this paper empirically tests the effects of investor attention on managers' earning management,financing behavior and investment behavior of listed companies on the base of catering theory and price pressure hypothesis,enriching the perspective of researching on the external governance.Secondly,in the aspect of research perspective,this paper builds research framework as "investor attention-earning management-cost of equity-investment efficiency",connect the factors mentioned above and empirical tests the intermediary effect.Thirdly,in research conclusion,this paper finds that investor attention means market pressure to managers.With the increasing degree of investor attention,resuting the larger degree of accrual earning management and lower degree of real earning management,and the tendency of positive earning management.Thus,deducing the cost of equity and promoting over investment.The conclusion provides new routed for understanding the limited rantional of investor and managers.