Does Innovation Sustainability Attract Retail Investors? The Clientele Effect in China

Man Yuan, Yuru Li and Tengfei Yang ()
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Man Yuan: Accounting School, Capital University of Economics and Business, Beijing 100070, China
Yuru Li: School of Accountancy, Central University of Finance and Economics, Beijing 100081, China
Tengfei Yang: National Computer Network Emergency Response Technical Team/Coordination Center of China, Beijing 100029, China

Sustainability, 2024, vol. 16, issue 19, 1-18

Abstract: Innovation sustainability is essential for businesses to maintain their competitive edge and ensure long-term growth. This not only benefits individual companies but also entire industries. Despite its importance, research on retail investors’ preferences for innovation sustainability remains limited. To address this gap, we analyzed unique data on shareholder numbers in listed Chinese companies from 2007 to 2020. We differentiate between institutional and retail investors to analyze the latter’s preferences. This finding indicates that retail investors prefer to invest in companies with higher innovation sustainability. This preference stems from their limitations in capabilities of information collection, analytical skills, and risk diversification. The clientele effect is more pronounced when companies face a poor innovation environment, an opaque information environment, and a weak political connection. This study contributes to the existing literature by providing empirical support for the clientele effect and shedding light on retail investors’ preferences and investment behavior. By focusing on company fundamentals, our study extends the examination of the clientele effect to the corporate governance level. These insights have significant implications for promoting sustainable development, impacting both companies and the capital market.

Keywords: innovation sustainability; sustainable development; retail investors; clientele effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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