Ownership,Investor Sentiment And Corporate Investment Efficiency

Many scholars and experts have done a lot of researches on corporate investment behavior, but most of the researches are based on the efficient market hypothesis that investors are "rational man", the market can accurately reflect the corporate value. In fact, investors often suffer psychological impact when they make a decision, their decision-making process does not necessarily follow the principle of utility maximization. Economic literatures have also proved that corporate stock prices often deviate from its’ true value in a certain period of time, what can not be explained under the framework of the traditional financial theory. With the development of behavioral finance theory, scholars think that the irrational behavior of investors, namely investor sentiment would lead to corporate stock prices "mispricing", besides it has a significant impact on corporate investment behavior. This paper further research the relationship between investor sentiment and corporate investment efficiency helps to improve the company efficiency of resource allocation and provides a theoretical basis for the development of China’s capital markets.This paper selects financial data from listed manufacturing companies in2002-2011years to conduct empirical research, using the method of least squares (OLS) regression. Empirical research is put out by taking cumulative stock returns over a year as a proxy for investor sentiment, which tests the impact of investor sentiment for the level of investment as well as for corporate investment efficiency, and further study whether differences in ownership would impact the relationship between corporate investment efficiency and investor sentiment is put out. Firstly, this paper discussed the relationship between investor sentiment and the level of corporate investors. Secondly, the corporate investment is expected to be divided into groups of underinvestment and overinvestment according to Richardson (2006) theoretical model in this paper, and studied the relationship between investor sentiment and corporate investment efficiency. Furthermore, nature of property rights introduced to study the relationship between the differences of property rights and corporate investment efficiency; Finally this paper further investigated whether differences in ownership would impact the relationship between investor sentiment and corporate investment efficiency.Through the analysis of the regression results, we draw the following conclusions:(1) investor sentiment will increase the level of corporate investing and lead to over-investment, and negatively correlated with the under-investment which is not significant;(2) state-owned companies are more tend to over-investment,private companies are more tend to under-investment;(3) for over-investment groups, private companies are more sensitive to investor sentiment. According to the conclusions this paper makes some policy recommendations for company and government regulators at last hoping to be able to regulate corporate investment decisions, stabilize the development of capital markets and contribute to further improvement of investment efficiency.The current research of investor sentiment focuses on the impact of investor sentiment for the level of company investment, while the impact of investor sentiment on corporate investment efficiency is still in its infancy. This paper combined with China’s institutional context, not only study the relationship between investor sentiment and corporate investment efficiency, it also study whether the differences in ownership will affect the relationship between investor sentiment and corporate investment efficiency.