Research On The Influence Of Individual Shareholder Activism

China’s capital market has played a vital role in economic development since the establishment of the Shanghai and Shenzhen Stock Exchanges in 1990.The 14 th Five-Year Plan and the outline of long-term goals for 2035 further emphasize the important role of the capital market in developing direct financing and supporting the real economy.Individual shareholders are the dominant force in China’s capital market.While they have provided ample liquidity and vitality for the capital market,their rights and interests are often violated.Foreign studies on shareholder activism mainly focus on institutional investors,and their institutional background and legal system are significantly different from those in China.Based on the institutional background in China,it is very important to study individual shareholder activism and its influence under the wave of technological change and informationization.This study collects 188 million posts on guba.eastmoney.com to constructs indicators of individual investor activism based on an information perspective.Then this study examines the influence of individual shareholder activism.In addition,this study builds a natural language processing model with a deep learning LSTM model(long short-term memory)to evaluate the sentiment of posts and explore the role of individual investor sentiment in the process of individual investor activism exerting influence.Specifically,this study examines the impact of individual investor activism in the capital market based on the perspectives of information and supervision.From the information perspective,this study explores how individual investor activism improves information efficiency in the capital market and generates impact.From the supervision perspective,this study investigates how individual investor activism exercises supervisory influence on the behavior of companies and auditors.First,based on the information perspective,this study examines the impact of individual shareholder activism on the information efficiency of the capital market.Specifically,this study examines how individual shareholder activism affects post-earnings announcement drift(PEAD).This study finds that individual shareholder activism is helpful in reducing PEAD.Active individual shareholders spend more time and energy on investment research to obtain more information.Based on their information advantages,active individual investors improve the information efficiency of the capital market by posting on guba.eastmoney.com,which helps earnings information be absorbed by the market faster.As a result,active individual shareholders improve the reaction of the capital markets,thereby reducing PEAD.Second,based on the information perspective,this study investigates the impact of individual investor activism on stock price crash risk.This study finds that individual investor activism helps reduce stock price crash risk.Active individual shareholders spend more time and energy on investment research to obtain more information.Compared with ordinary individual investors,active individual investors are more likely to obtain more information and correctly interpret the information.Based on information advantages,active individual investors disseminate information among individual investors by posting on guba.eastmoney.com,so as to alleviate the phenomenon that the occurrence time of negative events of companies is far earlier than their disclosure time,as well as the degree to which management conceals negative information.Third,based on the perspectives of information and supervision,this study investigates the impact of individual shareholder activism on auditors’ decision-making.Specifically,this study examines how individual shareholder activism affects audit quality.The findings suggest that individual shareholder activism can improve audit quality.Active individual shareholders spend more time and energy on investment research to obtain more information.Based on their information advantages,active individual investors spread information about firms to auditors by influencing other individual investors,which helps improve audit quality.Fourth,based on the supervisory perspective,this study investigates the impact of individual investor activism on corporate decision-making.Specifically,this study examines the impact of individual investor activism on corporate social responsibility(CSR).Individual investor activism may influence corporate decision-making by playing a supervisory role,such as increasing the supervision of companies by auditors,and by transmitting illegal information of companies to regulatory authorities to encourage further investigation and supervision of companies,thus making companies pay more attention to CSR.This study finds that individual investor activism improves a company’s CSR performance significantly.