Analyst Coverage,Investor Sentiment And R&D Investment

The change of the world economy structure and the research results of development economics both point out that innovation plays a key role im promoting economic growth and winning future competition for a country.Undoubtedly,the innovation activities of enterprises are the important driving force of the development of real economy and the source of competitive advantages of enterprises.How to break through the bottle neck of innovation has become a hot topic concerned by the government,society and academia.In the current capital market,due to the information asymmetry between listed companies and investors,the importance of the analysts as information intermediaries is apparent.Existing literature studies have found that the influence of analysts on R&D investment of listed companies is not unitary,but two opposite effects.On the one hand,analysts exert their personal expertise to interpret the public and private information of the tracking enterprise and convey the information to the market,thus reducing the degree of information asymmetry,which is called "information disclosure" effect.It can also alleviate the financing constraints of enterprises,and then to promote the R&D investment.On the other hand,analysts'earnings forecast tends to put pressure on the executives.In order to avoid adverse market reaction that fails to meet analysts'expectations,the managers may be,"short-sighted" to improve short-term performance neglecting long-term development,which is called "performance pressure" effect.It can inhibit the enterprise's R&D investment.At the same time,in the environment of "emerging and transitioning" in China,the irrational phenomenon of investors in China is more serious than the mature capital markets of developed countries.Investor sentiment,as the main measure of investor irrationality,reflects the overall optimistic or pessimistic attitude of investors towards the enterprise market valuation,and will also have impact on the company's R&D investment decision,thus affecting the enterprise's resource allocation.This article put the three important parts of the capital market--analysts,managers and investors to in the same research framework,based on the assumption that analysts rational,managers limited rational,and investors irrational.From the perspective of behavioral finance and based on the reality that China is in the economic transition period,this paper select A-share listed company data from 2009 to 2017,then use the method of theoretical derivation and empirical test,to find out the impact of analyst coverage and investor sentiment on corporate R&D investment respectively,and investor sentiment's adjustment effect between analyst coverage and corporate R&D investment.In order to reveal the essence of the adjustment effect,the paper also explores the specific influence path of investor sentiment on the relation.Through theoretical analysis and empirical test,this paper found that,firstly,analyst coverage and investor sentiment both play a positive role in promoting enterprises'R&D investment.Secondly,investor sentiment has a positive adjustment effect on the relation between analyst coverage and R&D investment,which means under the background of high investor sentiment,analyst coverage has a stronger positive effect on R&D investment.Lastly,investor sentiment plays a positive regulating role between them,which is mainly achieved by further easing the financing constraints of enterprises and reducing the pressure of performance expectation of the managers.The innovation and contribution of this paper lies in that,first of all,the past research literature concerned the effect of analyst coverage on the behavior of the listed companies,in particular the R&D investment behavior is not much,and analyst coverage will promote or inhibit the R&D investment has not been unified concluded.This paper further explores the relation between analyst coverage and R&D investment based on the background of the capital market in China,and has enriched the literature about the influence factors of R&D investment and the literature about the economic consequences of analyst;Secondly,this paper put the rational analyst,irrational investors and limited rational managers in the same research framework for the first time,from the perspective of behavioral finance,verifies the investor sentiment's adjustment effect on the relationship between analyst coverage and corporate R&D investment,and further explores the influence path of the investor sentiment's regulating effect.This paper not only enriched the literature of the interactive relationship among analyst coverage,investor sentiment and manager's R&D investment decision-making,but also provide a theoretical and experience support for how to promote the enterprise's R&D investment.