Analysis of strategic deviance decisions considering investors’ risk aversion and the industrial earnings forecast errors

Jie Gao (), Yang Feng (), Zeshui Xu () and Qianlin Luo ()
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Jie Gao: Southwestern University of Finance and Economics
Yang Feng: University of International Business and Economics
Zeshui Xu: Sichuan University
Qianlin Luo: Southwestern University of Finance and Economics

International Entrepreneurship and Management Journal, 2023, vol. 19, issue 1, No 15, 379-402

Abstract: Abstract Strategic deviance plays a crucial role in practice because it is very important for companies to gain competitive advantages. Previous studies have focused on the economic effects of corporate strategies, while ignoring the causes and influencing factors of corporate strategic decisions. Starting from the risk aversion of individual investors, this study introduces the roles of long-term and short-term institutional investors, and explores their impact on the companies’ deviant strategies. Based on the listed companies in Shanghai and Shenzhen stock markets from 2010 to 2020 as research samples, we use the multiple regression method to test the relationship between different types of investors’ shareholdings and corporate strategic deviance. The results show that there is a significant negative correlation between the shareholding ratio of short-term institutional investors and corporate strategic deviance, while the relationship is not significant with the long-term institutional investors’ shareholding ratio. However, the comprehensive shareholding ratio of institutional investors is significantly positively correlated with the corporate strategic deviance. Furthermore, this study finds that, due to the risk aversion of individual investors, industrial earnings forecast error plays a moderating role in the relationship between the comprehensive shareholding ratio of institutional investors and the corporate strategic deviance. That is, the positive correlation between the two is significant when the industrial earnings forecast error is low, but not significant when it is high.

Keywords: Strategic deviance; Individual investors; Risk aversion; Industrial earnings forecast errors (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11365-022-00827-0

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