Investor Sentiment, Ecomomic Cycles And Corporate Investment Behavior

In recent years, the financial crisis has shown that financial market will affect the real economy. The crisis will have a financial friction, impacting the financing cost of micro enterprise. Based on this, this article from the macro environment of the market economy, exploring the influencing factors of external financing and the influence of investments.Previous studies argue that external finance varies with the investor sentiment and the economic cycle. Behavioral Finance relax the hypothesis of rational investors,suggest that investor have the psychological factors such as cognitive biases and overconfidence, and the fluctuations in sentiments making the capital markets stock prices deviate from its true value, and thus affect the company’s finance options. View of monetary economics think during the recession, corporate external finance is negatively affected. Based on this, this study explores the effects of the market-level investor sentiment and economic cycle on corporate external finance costs, and further analysis of investment behavior is inhibited or promoted.Using China’s listed companies in 2000-2012 as samples, analyzing the panel data by mixed fixed effects model. Firstly, using principal component analysis to construct Chinese investor sentiment index(CISCI),completed a consistency test and found it is highly consistent with the same period the Shanghai and Shenzhen stock market. While using GDP growth to designate the economic cycle, confirming the uplink and downlink economy. Then, using the Tobin Q theory and investment-cash flow theory to explore the impact of both the external economic environment for business investment behavior. In this paper, the empirical results are as follows: in the high emotional and economic uplink period, along with external financing cost reduction, increasing sensitivity to Tobin Q and weakening the sensitivity to cash flow. At the same time,both the external economic environment variables are also significant on independent consideration. When considering there are significant independent influence. According to China’s market environment, research on the cost of external financing in bank lending, shows that the impact of the economic cycle on bank credit is different with assumptions, the reason is that our country medium and long-term loan exists reverse cycle. In addition, this paper also constructs the financing constraint variable, studydirectly on the influence of investor sentiment and economic cycle of the enterprise external financing cost, confirm the investment behavior of enterprise with financing constraints are more susceptible to two external environment variables, of investor sentiment, and the impact of the economic cycle to the enterprise external financing cost directly, confirm the effect of investment behavior of enterprise financing constraints are more easily influenced by two external environment variables.This study enriches the research areas that virtual economic how to affect the entity economic, taking into account the economic cycle and investor sentiment, better reflect the financial market environment. Through the Tobin Q theory to demonstrate the vrtual economic impact on the real economy, the result shows the effectiveness of Tobin’s Q continues to increase on our increasingly sophisticated capital markets.