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

Author

Listed:
  • 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.)

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.

Suggested Citation

  • Huang Yi & Yang Xiugang, 2018. "Investors’ Sentiment and Enterprise's Non-Efficient investment: The Intermediary Effect of Stock Price Volatility," International Journal of Business and Social Research, LAR Center Press, vol. 8(7), pages 1-14, July.
    • Handle: RePEc:lrc:larijb:v:8:y:2018:i:7:p:1-14
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    More about this item

    Keywords

    Investors’ Sentiment; Irrational Behavior; Non-Efficient Investment; Stock Price Volatility; Tobin Q Value;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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