Capital Structure, Investor Sentiment And Corporate Investment

The discovery of behavioral finance provides a new train to study capital market,While acknowledging the existence of investors’ irrational factors, effects ofinvestor sentiment on market volatility, asset pricing, stock prices, have become animportant research direction. Compared with foreign mature capital market, China’sstock market is still in the stage form immaturity to maturity. A large proportion ofindividual investors, the impact of investor sentiment on the company’s share priceis also very obvious, changes in investor sentiment can lead to stock marketvolatility and the stock "mispricing", A large number of empirical studies alsoproved this conclusion. Since the stock price change is the result of outside investorsinvestment decisions which based on information about corporate, in addition tomaster information on a regular basis, Another way of investor to get information isthrough the behavior of the company indirectly, So stock price, corporate behaviorand investor sentiment are closely related, and investment behavior is the most corecorporate behavior and most relevant with stock price. So the research of therelationship between investor sentiment and corporate investment behavior isconducive to explain the impact of investor sentiment on the macro-economy fromthe micro level.However, on the one hand, investment behavior is influenced by fluctuations ininvestor sentiment, On the other hand, has close ties to corporate capital structure,studies single impact of investor sentiment on the investment behavior can’t fullyreflect the partial effect on investment behavior. Based on this, the study is dividedinto two phases, Firstly the paper studies investor sentiment and capital structure’simpact on corporate investment in single way; then analyze the interaction betweendifferent capital structure factors and investor sentiment, verifies whether thisinteraction will weaken or enhance the impact of the relationship between investorsentiment and corporate investment, So as to arrive at different factors capitalstructure lever, the combined effects of investor sentiment on the level ofinvestment.By applying the basic theory of accounting, financial management andbehavioral finance, this article investigates the relationship between capital structure, investor sentiment and corporate investment. First of all, this paper reviews therelated researches both at home and abroad, including the study on the impact ofinvestor sentiment on the capital market, the impact of investor sentiment oncorporate behavior and the impact of capital structure on corporate investment.Secondly, this paper states the basic theories: behavioral finance, Theory offinancing constraints and influence mechanism theory. Thirdly, the specificinfluence mechanism of investor sentiment and capital structure on corporateinvestment are analyzed, then focuses on discussion of the different impact ofinvestor sentiment on corporate investment in different level of capital structure.Finally, in order to validate academic analysis, this paper uses the data from2004to2013of China’s A-share listed companies in Shanghai Stock Exchange and carrieson multiple regression and interaction regression model analysis.The conclusions are as follows:(1) capital structure and investor sentimenthave significantly influence on corporate investment in single way;(2) interactionbetween asset-liability ratio and investor sentiment will weaken the influence ofinvestor sentiment on corporate investment;(3) interaction between long-term debtratio and investor sentiment will enhance the impact of investor sentiment oncorporate investment;(4) Interaction between the proportion of the largestshareholder and investor sentiment will enhance the impact of emotion on corporateinvestment;(5) Interaction between the proportion of investor tradable shares andinvestor sentiment will weaken the influence of investor sentiment on corporateinvestment. The findings enrich the influence mechanism theory of investorsentiment on corporate investment, providing theoretical support and empiricalevidence for investors to make decisions, listed companies to manage investment,regulators to supervise.