Research On Growth Opportunities,Investor Sentiment And Corporate Innovative Investments

Innovation is the first driving force for enterprises to achieve high-quality development,to survive in market competition,and is also the way for enterprises to increase the risk-resistance capacity in the post-epidemic period.Therefore,the enduring proposition of "how to stimulate and support enterprise innovation" exhibits both importance and urgency in this challenging episode.To encourage enterprise innovation,we shall emphasize on original factors that affect the innovation investment of enterprises.Based on the Q-INVESTMENT theory and Financing Pecking Order theory,we find that growth opportunity and cash flow are two key elements,but which one is more important? Studies on this question are scarce.On the other hand,innovation is characterized by large investment,long cycles and high risks,and thus needs to be guided and supported by a well-functioning capital market.The Western Behavioral Corporate Finance theory holds that the investor sentiment caused by market investor irrationality can promote the enterprise innovation investment.However,compared with developed Western capital markets,individual investors in China's capital markets occupy a large proportion in both the composition of investment subjects and the size of transactions.Their "speculative psychology" and "herding effect" inevitably boost the investor sentiment,and this kind of high investor sentiment to the stock market as well as the listed company's influence creates the uncertainty.In addition,in the special multi-level capital market structure of China,there are significant differences in investor structure and sentiment among different market segments.Based on the above theoretical and practical background,this paper attempts to answer the following questions:(1)Is the growth opportunity or internal cash flow the driving factor of innovation investment?(2)How does market investor sentiment influence the driving factors of enterprise innovation to promote enterprise innovation investment?(3)How does the different investor sentiment in the multi-level capital market affect the innovation investment decision-making of enterprises with different growth opportunities?(4)How does the supervisory function of institutional investors play a governance role in the promotion of investor sentiment in enterprise innovation investment?In order to answer the above questions,this paper puts the internal driving factors and external market factors of enterprise innovation investment into the same analytical framework,and then scrutinizes the driving factors of enterprise innovation investment.On this basis,through "in-market" and "cross-market" research,the mechanism of market investment sentiment influencing the effect of innovation investment motive has been analyzed.Total 335 state-level innovative enterprises listed in Shanghai and Shenzhen were selected as the sample of empirical analysis in the market,844 companies listed on New Third Board innovation layer and 669 companies listed on Growth Enterprise Market(GEM)were selected as the sample of cross-market comparative study.Through theoretical analysis and empirical test,this paper analyzes the relationship among enterprise growth opportunity,market investor sentiment and innovation investment,and yields the following conclusions:(1)Both "in-market" and "cross-market" tests reveal that the key internal driver of firm innovation investment is growth opportunity.Compared with the state-owned enterprises,the private-owned enterprises are more sensitive to the growth opportunity,and the new third board enterprises value the growth opportunity more.The conclusion shows that growth opportunity is the internal driving factor of innovation investment,and enterprises should invest in innovation projects if they have better development opportunity.For the enterprises whose financing is restricted,the financing function of external capital market can be used to alleviate the problem.(2)By selecting the state-level innovative enterprises listed on the Shanghai and Shenzhen Stock Exchanges as the research sample,the "inmarket" analysis shows that investor sentiment promotes the enterprise's innovation investment by acting on the enterprise's growth opportunity,this effect works through financing channels.High investor sentiment can promote the innovation investment of private enterprises with high growth opportunity,but the innovation investment of state-owned enterprises is not sensitive to investor sentiment.Furthermore,after investigating the marginal effect of investor sentiment under financing constraints on the innovation investment behavior of enterprises,it is found that private enterprises under financing constraints will make more innovation investment when investor sentiment is high.This further proves that investor sentiment promotes the innovation investment of enterprises by reducing the financing cost.(3)By choosing the two main capital markets of service innovation startup SMEs �� The New Third Board and the Growth Enterprise Market as the research targets,we discover that compared with the Growth Enterprise Market,the innovation investment of New Third Board enterprises with more growth opportunities is higher.Further research finds that although the New Third Board is higher than the Growth Enterprise Market in terms of innovation investment.The depressed investor sentiment plays an intermediary role in the above results,and the listing of enterprises with high dependence on external financing on the New Third Board is not conducive to their innovative investment because the depressed investor sentiment on the New Third Board restricts their external financing,further proving that,investor sentiment influences enterprises' innovative investment through "financing channel mechanism".(4)Through the two-sided analysis of investor sentiment influencing enterprise innovation investment,it is found that investor sentiment has a nonlinear effect on enterprise innovation investment.In the New Third Board,the high investor sentiment can promote the enterprise innovation investment,in the Growth Enterprise Market,the higher the investor sentiment,the lower the enterprise innovation investment is.Furthermore,from the perspective of institutional investor supervision,this paper discusses the governance mechanism of the impact of market investor sentiment on enterprise innovation investment,we find that independent institutional investors with supervisory function in Growth Enterprise Market can alleviate the inhibition of investor sentiment on innovation investment and have positive governance effect.The non-independent institutional investors in the New Third Board play a mediating and shadowing effect in the process of investor sentiment promoting innovation investment.The main innovations of this paper are as follows:(1)The research of this paper provides new evidence to solve the puzzle of Q-INVESTMENT theory.Q-INVESTMENT theory holds that the growth opportunity of firms is the complete explanatory variable of firm investment,but plenty of empirical studies have argued that Q's explanatory power is limited.This paper supports the Q-INVESTMENT theory by studying the leading factors of enterprise innovation investment,and finds that the growth opportunity is the key factor of enterprise innovation investment.(2)Based on the cross-market comparative analysis of the New Third Board and the Growth Enterprise Market,this paper sheds new insights on studying enterprise innovation investment from the multi-level capital market.The existing literature on innovation investment mainly focuses on the single capital market(such as GEM)or all the listed companies in the market(main board,small and medium-sized board and GEM),rarely based on China's multi-level capital market structure.In contrast,this paper discusses the influence of different investor sentiment on enterprise innovation investment in capital market of different development degree.(3)On the basis of the Q-INVESTMENT theory of Abel(1983)and the irrational investor framework of Baker et al.(2007),this paper brings into the same research framework for the first time the intrinsic driving factors,namely,the growth opportunity and the external market investor sentiment,which affect the firm's innovation investment.As a result,this paper expands the existing research paradigm on the impact of enterprise innovation investment.(4)This paper furnishes related research with exploring the impact of investor sentiment on enterprise innovation through equity financing channels.Whether by selecting the "in-market" research of the most representative national-level innovative enterprises,or by selecting the New Third Board and the Growth Enterprise Board,which serve the small and medium-sized innovative enterprises,to make a "cross-market" comparison,this study finds that investor sentiment influences firm's innovation investment through equity financing channels rather than managers' pandering channels.This paper starts from the exploration of the internal driving factors of enterprise innovation investment.Through a hierarchical and coherent study,it explores the mechanism of the investor sentiment effect on growth opportunities in influencing the equity financing of innovation investment within the same market and across different markets.The research conclusion of this paper is helpful to provide decision-making basis for the government to take more effective incentive ways to promote the innovation investment of enterprises.It can also provide reliable evidence and feasible policy recommendations for market regulators in the innovation reform of capital market service enterprises.Finally,it can also provide a reference for market investors to judge and evaluate the innovation activities and investment value of enterprises in multi-level capital market.