Empirical Study Of Investor Sentiment On Corporate Investment Behavior

Since 1950 s, the modern financial theories begun rapid development, but these theories are based on rational investor rationality and top managers. With the continuous development of finance, it was found under the assumption of rational people, the market there are many visions, such as January phenomenon, share premium, closed-end fund discount, and these visions are unexplained by the traditional finance. Thus, in order to explain these phenomena, there is a new direction-- Behavioral Finance. Behavioral Finance is a psychology and finance cross-cutting disciplines, it assumes that people are irrational behavior. Irrational investors will make the company’s stock price deviate from its intrinsic value, this irrational behavior of investors was called investor sentiment. So what does the stock price which is caused by investor sentiment impact on the investment behavior of enterprises, it becomes a new hot research scholars at a time.Existing domestic literature researches investor sentiment impact on investment behavior of enterprises along the foreign idea, and these extensive researches have important value, but they have the following disadvantages: First, the most domestic researches are confined to foreign literature, its content is more general studies, specifically these studies are lack of in-depth research on the characteristics of the Chinese stock market; Secondly, most of the literature did not take into account the differences in business, state-owned enterprises account for half of China’s A-share market; Finally, investor sentiment is a difference, they are blind optimism in a bull market and excessive pessimism in a bear market, this difference is ignored by a lot of literature.In this paper, we utilized 683 companies panel data of China’s A-share from 2005-2013 and used momentum indicators to portray investor sentiment. From the perspective of ownership property, we studied the relationship between investor sentiment and corporate investment behavior. In this paper, the following conclusions:(1) From the overall sample of view, there was a significant positive correlation between investor sentiment and corporate investment behavior.(2) The ownership property is different, so the effects of investor sentiment on corporate investment behavior is different. The sample was divided by state-owned enterprises and non-state-owned enterprises, we researched investor sentiment significantly affect the investment behavior of state-owned enterprises, but state-owned enterprises were not significant.(3) We further studied the sample of state-owned enterprises, and find that the impact of investor sentiment on corporate investment behavior and the size of the stake were positively correlated. The higher proportion of holding shares, the greater the impact of corporate investment behavior will be suffered by investor sentiment.(4) Finally, we studied the effects of investor sentiment on corporate investment behavior during bull and bear markets in the sample of state-owned enterprises, we found that state-owned enterprise investment behavior is influenced by investor sentiment in the bear market was significantly greater impact than in the bull market. Therefore, the impact of investor sentiment on the investment of state-owned enterprises consist asymmetry in a bull market or bear market. In addition, due to the influence of investor sentiment on the investment behavior of non-state corporate is not significant, the further study will be no meaning.This article may exist following innovations: First, from the perspective of ownership property, we studied the effect of investor sentiment on corporate investment behavior in the different ownership property, and further studied that the investor sentiment impacted investment decisions in the bull market or bear market and on the actual controlling shareholders’ proportion; Secondly, we select 2005-2013 data because in this time period is just that there are two bull(2005-2008,2009-2010) and two bear markets(2008-2009,2010- 2013), previous literature rarely considered bullish(positive investor sentiment) and bearish(pessimistic investor sentiment) effect, which may cause the asymmetry impact of investor sentiment on corporate investment behavior; Finally, the time span of the sample is very long and there are a lot of the number of samples, so the article are more convincing.This article has important significance. First of all, from the perspective of ownership property, we comprehensively analysed the impact of investor sentiment on the state and non-state-owned enterprise investment behavior and respectively studied the effects of its actual holding and the effect in bull market or bear market, and we provided a new way of thinking for future research. Secondly, the conclusion of this study provides an evidence which proved the inefficiency of state-owned enterprises and strengthen the regulatory of state-owned enterprises, so it has much practical significance.