 Does individual investor trading impact firm valuation?Qin Wang and Jun Zhang Journal of Corporate Finance, 2015, vol. 35, issue C, 120-135 Abstract: Motivated by recent evidence of informed trading by individual investors (Kaniel et al., 2012; Kelley and Tetlock, 2013; Wang and Zhang, 2015), we posit that individual investor trading enhances firm performance. Consistent with the conjecture, we find that individual investor trading positively impacts firm value. The results are robust to inclusion of year, industry and firm fixed effects, alternative model specifications, a control for endogeneity, Granger causality test, matched sample analysis and subsample analyses. The positive effect of individual investor trading on firm value is stronger for firms with higher information production and stocks with higher spread, consistent with the information and spread channel mechanism. Our results suggest that trading by individual investors enhances firm value by improving stock price informativeness and reducing spread. Keywords: Individual investor trading; Firm valuation; Granger causality; Information production; Bid-ask spread (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:35:y:2015:i:c:p:120-135 DOI: 10.1016/j.jcorpfin.2015.08.001 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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