The Motivation、Investment Behavior And Value Effect Of Investment Funds Established By Listed Companies

As China’s economy gradually enters the new normal and the supply-side structural reform is carried out,listed companies have an increasingly strong demand for industrial transformation and upgrading through outbound investment activities such as mergers and acquisitions.In this context,more and more listed companies set up or jointly set up investment funds such as buyout funds or industrial investment fund with external professional investment institutions to achieve industrial transformation or strategic expansion.According to statistics,from 2011 to 2020,1,334 listed companies have established 2,529 investment funds.Many listed companies have successfully achieved their strategic development goals with the help of such investment funds.Investment funds established by listed companies have become an important force in the multi-level capital market and an important driver of the transformation and upgrading of the real economy.However,a series of problems have appeared in the development of investment funds established by listed companies.For example,some investment funds blindly make cross-border investments following market hot concepts,and some companies use investment funds for profit transmission and insider trading.How to improve the efficiency of investment funds and standardize the operation of funds has become an important issue for market participants and regulators.Exploring the motivation,investment behavior and the value effect of investment funds established by listed companies can provide important theoretical guidance to solve the above problems.However,due to the short development of such investment funds,the academic community has paid less attention to this issue.In addition,the sample size available for research is limited before,and relevant research at home and abroad is still very limited.Most of the existing research is qualitative research and case analysis,and the few empirical researches mainly focus on the market reaction and the factors influencing the establishment of investment funds.This research systematically reviewed the relevant literatures on corporate venture capital,listed companies setting up investment funds and so on.Based on the summary of the existing research,this study believes that performance feedback theory should be introduced to fundamentally gain insight into the investment behavior mechanism of investment funds.Based on the performance feedback theory,this research systematically investigates the important role of search behavior caused by performance feedback in explaining the establishment of investment funds and the industry choice of investment funds and its impact on corporate value.This research is mainly divided into three closely related and progressive sub-studies.Sub-study one explores the impact of attainment discrepancy(including the two dimensions of degree and persistence,the same below)on the establishment of investment funds,and the moderating effect of the internal and external environment of the organization(slack resources and industry competition intensity)on the above relationship.The findings are as follows: first,performance attainment discrepancy affects the possibility of companies to set up investment funds.Specifically,when the performance is lower than the aspiration level,to improve the performance to the aspiration level,the company will conduct problem search.The larger the negative attainment discrepancy and the longer the duration,the more likely the company will set up investment funds;When the performance is higher than the aspiration level,the company will also carry out search actions to maintain stable performance growth.The larger the positive attainment discrepancy and the longer it lasts,the more likely the company will set up investment funds.Second,considering the abundance of internal resources,slack resources strengthen the positive impact of the negative attainment discrepancy and the duration of negative attainment discrepancy on the establishment of investment funds;Thirdly,considering the external competitive environment,the intensity of industry competition strengthens the positive impact of the duration of negative attainment discrepancy on the establishment of investment funds and weakens the positive impact of positive attainment discrepancy and the duration of positive attainment discrepancy on the establishment of investment funds.Finally,further research shows that the performance feedback also affects the characteristics of the investment funds established by the company.The larger the negative attainment discrepancy,the larger the scale of the investment funds,and the longer it lasts,the higher the proportion of the company’s investment in the investment funds;The larger the positive attainment discrepancy,the larger the scale of the investment fund established by listed companies and the lower the proportion of listed companies in the investment fund,the higher the possibility of hiring affiliated parties such as subsidiaries to manage the fund.Sub-study two further investigates how the attainment discrepancy affects the industry choice of investment funds and the impact of internal and external environment of the organization(Slack resources and industry growth capacity)on the above relationship.The results show that,first,the attainment discrepancy does affect the industry choice of investment funds.Specifically,when the performance is lower than the aspiration level,the company tends to use investment funds to carry out cross-industry investment.The larger the negative attainment discrepancy and the longer the duration,the higher the cross-industry investment tendency of investment funds.However,the effect of positive attainment discrepancy on the industry choice of investment funds is more complex.The larger the positive attainment discrepancy is,the more likely the investment funds are to invest in the same industry based on the positive performance feedback from past operations.However,unexpectedly,the longer the positive attainment discrepancy persists,the higher the propensity of investment funds to invest across industries,which may be related to the overconfidence characteristics of managers.Second,considering the abundance of internal resources and the ability to resist risks,slack resources strengthen the positive correlation between "negative attainment discrepancy(degree and persistence)and cross-industry investment".Thirdly,considering the development potential of the industry,the industry growth capability weakens the positive correlation between " negative attainment discrepancy(degree and persistence)-cross-industry investment",and also weakens the positive correlation between "persistent positive attainment discrepancy-cross-industry investment".Finally,further considering the internal characteristics of investment funds,when the affiliated parties such as subsidiaries of listed companies are investment fund managers,the impact of performance feedback on the industry choice of investment funds is more significant.In addition,the degree and persistence of attainment discrepancy are different dimensions of performance feedback,and there is an interaction effect.The positive attainment discrepancy weakens the positive influence of the duration of positive attainment discrepancy on the cross-industry investment of investment funds,while negative attainment discrepancy and the duration of negative attainment discrepancy does not affect each other’s relationship with the investment fund’s cross-industry investment.The third sub-study mainly further studies the influence of the investment fund establishment and the industry choice of investment funds on the corporate value and the moderating effect of the performance feedback on the above relationship.The results show that the short-term market reaction to the announcement of the company’s establishment of an investment fund was significantly positive,while the long-term market reaction was significantly negative.The larger the investment scale of the investment funds,the more significant the promotion effect on corporate value;The cross-industry investment of investment fund has a significant negative impact on corporate value.Second,considering the performance pressure faced by enterprises,the duration of negative attainment discrepancy strengthens the positive impact of the investment scale on corporate value,while the duration of positive attainment discrepancy weakens the positive impact of investment scale on corporate value.The duration of negative attainment discrepancy weakens the negative impact of cross-industry investment of investment funds on corporate value,while positive attainment discrepancy and the duration of positive attainment discrepancy strengthens the above relationship.Third,the further heterogeneity test shows that the moderating effect of performance feedback on the above relationship mainly occurs in the group with more slack resources.The research topic,research perspective,and theoretical framework of this research are innovative,and the potential contributions are as follows: First,this study expands the existing research on the establishment of investment funds by listed companies from the previous causes to specific investment behaviors,and then to economic consequences,enriching the relevant research.Second,the investment fund set up by Chinese listed companies is an emerging operation mode for domestic enterprises to carry out venture capital.This research highlights the special institutional background of China,embodies Chinese characteristics,and provides evidence from China’s emerging markets for the research of corporate venture capital in the international scope.Third,this study innovatively puts forward the concept of the duration of positive attainment discrepancy,and discusses its impact on corporate behavior,enriching the research results of performance feedback theory.Fourth,based on the performance feedback theory,this research not only focuses on the impact of performance feedback on enterprise search behavior,but also investigates the consequences of search behavior induced by performance feedback,which makes a contribution to the performance feedback theory.