Investor Sentiment,Institutional Investors And Corporate Investment Efficiency

Based on the fundamental assumption of investors' bounded rationality,this paper proposes and analyzes the impact of two types of investors in the market,namely individual investors and institutional investors,on the investment efficiency of the company at the company level.Specifically,it is to study the impact of investor sentiment mainly caused by individual investors faced by listed companies on their inefficient investments,and whether corporates' institutional investors can play a regulatory role in this relationship.Institutional investors are classified according to stability to further study whether different types of institutional investors have different impacts.In addition,in order to make the research content and conclusion more practical,this article combines the special institutional environment in which Chinese enterprises are located,and considers whether the relationship between the above three is different in enterprises with different degrees of government control.The empirical analysis uses the data from 2010 to 2018 as a sample,and uses a partial least squares(PLS)method that is more accurate than the principal component analysis method to measure the investor sentiment variables,and then analyzes the relationship between sentiment,institutional investors and corporate inefficient investments.Through empirical research,this paper finds that the underinvestment of listed companies in China's capital market is more common,but the degree of overinvestment is more serious.There is a significant positive correlation between investor sentiment and overinvestment and a significant negative correlation between investor sentiment and underinvestment.Institutional investors can participate in corporate governance by holding shares in listed companies and supervising the management of the companies they hold.Meanwhile,they can also make use of their own advantages to gain private interests,weakening their supervision function.Results show that institutional investors in China's market have not played their supervision role well,but more tend to enhance the relationship between investor sentiment and the inefficient investment of the enterprises they hold through behavior beyond supervision.After the classification of institutional investors according to shareholding stability,it suggests that for underinvested enterprises,the shareholding stability of institutional investors will significantly enhance the negative correlation between investor sentiment and underinvestment.While for overinvested enterprises,this effect is not significant.This result may indicate that the institutional investors in Chinese market have not play a role of supervision well.Among them,transactional institutional investors with nonsupervisory purposes may take a larger proportion.Their purpose is no longer to participate in the supervision and administration of enterprises,but to pursuit of shortterm profit through frequent market trading behavior,thereby enhancing investor sentiment's influence on investment efficiency,and may finally even change long-term value of the corporates they hold.In addition,compared with state-owned enterprises,non-state-owned enterprises' inefficient investment is more significantly affected by investor sentiment,and institutional investors' regulatory effect is more obvious.This result may reflect that the salary pattern of state-owned enterprises' management is relatively fixed,management themselves are also face regulation,and then less affected by investor sentiment in stocks mispricing.At the same time,institutional investors,especially stable ones holding stateowned enterprises may prefer a long-term goal,tending to supervise the enterprise by actively participating in corporate governance and other ways and then helping the corporates realize long-term value.The reform of state-owned enterprises also makes state-owned enterprises further integrate the advantages of non-state-owned enterprises in capital and technology,which may make the gap between state-owned enterprises and non-state-owned enterprises gradually narrow.By analyzing the relationship between different types of investors and enterprises' inefficient investment in the current Chinese capital market,and further discussing the problems in combination with the market institutional norms,this paper provides a useful perspective for better understanding the current development status of China's capital market and the relationship between investors and enterprises.At the same time,we also hope to provide some enlightenment for Chinese enterprises,so that they can fully understand the current state of investor sentiment in the market,and pay attention to the role of institutional shareholders,so as to make the management focus on the realization of long-term value of enterprises.