Does Investor Sentiment Regulate The Impact Of Economic Policy Uncertainty On The Cost Of Equity Financing?

In recent years,although my country’s economy has grown steadily,it is also facing complex international relations and changes in the domestic situation.In order to cope with complex environmental changes,the Chinese government has launched a series of macroeconomic policies to support the smooth operation of the economy.However,due to the complexity and variability of information in the market,the regulation of macroeconomic policies often cannot keep up with changes in the market,and there is a certain lag,which will make the frequency of economic policy changes greater,resulting in the risk of economic policy uncertainty.As the securities market matures,more and more companies choose to refinance in the stock market,and the cost of equity financing will not only be affected by the company’s own performance,but also the external macroeconomic impact is very large.Therefore,this article will proceed from the uncertainty of economic policy and explore how it will affect the cost of equity financing of listed companies,so as to further expand the relevant factors that affect the cost of equity financing.In practice,it is conducive to preventing the adverse effects of uncertain risks on corporate financing,which in turn allows companies to better replenish their blood and increase vitality.On this basis,this article will introduce investor sentiment to further analyze whether it can regulate the impact of economic policy uncertainty on the cost of equity financing.The introduction of factors affecting investor sentiment is conducive to expanding the adjustment mechanism of the impact of economic policy uncertainty on the cost of equity financing.In practice,this paper empirically analyzes how investor sentiment regulates the relationship between the cost of equity financing and the economic policy uncertainty index,and then formulates relevant policies for government departments,guides investor sentiment back to rationality,and introduces relevant supervision by regulatory authorities The policy makes feasibility recommendations.Aiming at the above problems,this article studies from the following aspects.In the selection of indicators,the EPU index proposed by Baker et al.(2016)is selected as the substitute variable for economic policy uncertainty.The index is continuous and is a good substitute variable.And the volatility of the index is also in line with the events that occurred during this period.For the cost of equity financing,the GLS model is used as its estimation model,and in order to ensure that the results are convincing,this paper also uses the OJN model for robustness testing.For investor sentiment,the index is obtained by referring to the calculation methods of Yi Zhigao and Mao Ning(2009).Control variables are selected on the basis of previous research,and the data are all from the CSMAR database.This article studies my country’s listed companies from 2007 to 2017,analyzes the impact of economic policy uncertainty on the cost of equity financing,and introduces investor sentiment to further analyze its regulatory effect between the two.Through empirical analysis,it is found that economic policy uncertainty has a significant positive effect on equity financing costs.A further analysis of the comparison of enterprises into state-owned enterprises and private enterprises found that the cost of equity financing of state-owned enterprises is less affected by policy uncertainty.Subsequently,this article adds investor sentiment indicators and finds that it can alleviate the impact of economic policy uncertainty on the cost of equity financing.And further analysis of the difference between state-owned enterprises and private enterprises,found that the adjustment effect of investor sentiment in state-owned enterprises is more obvious.Finally,according to the research conclusions,this paper puts forward specific suggestions from the perspective of government,investors and regulators.For the government department,the government department cannot modify the policy too frequently.For individual investors,the professionalism of individual investors should be improved and the irrational operations of individual investors should be reduced.For the distribution structure of investors,the proportion of institutional investors should be increased,and the threshold for small investors to enter the stock market should be raised.For the regulatory authorities,the relevant regulatory authorities should further improve the company’s information disclosure system,especially the supervision of private enterprises,so that investors can have a more reasonable assessment of the enterprise when facing economic policy uncertainty.