Research On The Influence Of The Herding Effect Of Private Investment In Public Equity By Public Firms

In recent years,China’s A-share public firms have shown an obvious preference for private investment in public equity.This paper believes that the financing cluster phenomenon may be the performance of herding.Firstly,this paper takes the data of 2060 A-share public firms in China from 2006 to 2020 as a sample to measure the degree of herding in the region(industry)of private investment in public equity by public firms.After descriptive statistics and correlation analysis,this paper starts from the decision-making of firm private investment in public equity and financial performance are two aspects to empirically test the impact of herding effect of private investment in public equity in regions(industries)on firms.The results show that:(1)There is a significant positive correlation between the herding effect of private investment in public equity in regions(industries)and the decision-making of private investment in public equity.(2)On this basis,it is further found that economic policy uncertainty plays a significant negative regulatory role in the correlation between herding effect of private investment in public equity in regions(industries)and decision-making of private investment in public equity.(3)Firms’ decision-making behavior of private investment in public equity imitating regional(industry)groups has a significant positive role in promoting their profitability and growth ability.(4)The further research results show that the greater the competitive pressure,the more vulnerable firms are to herding for competitive needs,so as to make the decision of private investment in public equity.The behavior of firms imitating industry groups to make decisions on private investment in public equity has a significant positive role in promoting financial performance,and the cost of equity financing plays a partial intermediary role in the relationship between them.It means that firms imitating industry groups to make decisions on private investment in public equity will reduce the cost of equity financing,and then play a positive role in promoting financial performance.On the one hand,this paper will enrich the existing theoretical and practical research field of firm financing,and has better theoretical and practical significance,on the other hand,the research conclusion of this paper also has important application value.This research conclusion will help to deeply understand the equity refinancing motivation of public firms in China as a whole,and also help investors in Chinese capital market to better understand the financing motivation of firms from the equity refinancing behavior.According to the empirical results,this paper also forms some practical policy suggestions: for firms,things can’t be generalized,completely ignore private information and blindly follow,and should maintain a rational state of comprehensive decision-making.For the government and regulators,they should adjust the policies according to the equity refinancing of firms and give appropriate guidance to avoid the formation of excessive clusters.For investors,they should correctly understand the real motivation of private investment in public equity by public firms from many aspects and angles,so as to rationally respond to the equity refinancing behavior of firms.