Investors’ Sentiment and Enterprise's Non-Efficient investment: The Intermediary Effect of Stock Price Volatility

Huang Yi () and Yang Xiugang ()
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Huang Yi: The Business Administration at the China-Asean International College, Dhurakij Pundit University, Thailand.
Yang Xiugang: The Business Administration at the China-Asean International College, Dhurakij Pundit University, Thailand.

International Journal of Business and Social Research, 2018, vol. 8, issue 7, 1-14

Abstract: Based on the bounded rationality hypothesis, the purpose of this paper is to explore the influence of investors' irrational sentiment on the enterprise's non-efficient investment by taking the Chinese A-shares listed company data as the research object. The research method is the fixed effect regression method of panel data，and the findings are that: (1) the investors irrational sentiment is significantly affecting the enterprise's non-efficient investment, the stock price volatility plays a mediating role between the two; and (2) the investors’ sentiment is one of the reasons for the fluctuation of market share price, which deviates from the fundamental value; we also find that (3) the over-valued stock promote the over-investment, the under-valued stock sharpen the under-investment seriously. Therefore, we think that, in emerging market of Chinese, the investors’ irrational sentiment and the stock price volatility have been becoming the external economic environment of enterprise investment indirectly affect its investment efficiency. These findings reveal that it is important to understand investors’ irrational behaviors in enterprise investment decision-making. The contribution of this paper complements the Tobin Q theory and validates that stock price volatility plays a mediating role between investors’ irrational sentiment and enterprise inefficient investment.

Keywords: Investors’ Sentiment; Irrational Behavior; Non-Efficient Investment; Stock Price Volatility; Tobin Q Value (search for similar items in EconPapers)
JEL-codes: G12 G14 G31 G32 (search for similar items in EconPapers)
Date: 2018
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