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Does the online interaction between retail investors and firm management affect capital structure?

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  • Du, Zhihui
  • Zheng, Xiaojia
  • Zhang, Chenye
  • Zhou, Rongxi

Abstract

This paper examines whether and how online interactions between retail investors and firm management affect financial leverage. Using a sample of Chinese A-share listed companies from 2010 to 2021, we find that retail investors’ interaction with management, measured by the number of posts and replies in online interactive investor platforms, significantly decreases firms’ financial leverage by mitigating information asymmetry. Further analyses show that this negative relationship is stronger for firms with more opaque information environments measured by higher research and development intensity, greater asset intangibility, lower analyst coverage, and higher retail ownership. Our findings suggest that retail investors significantly impact firms’ financial leverage decisions, and provide positive evidence for information disclosure reform in an emerging capital market.

Suggested Citation

  • Du, Zhihui & Zheng, Xiaojia & Zhang, Chenye & Zhou, Rongxi, 2023. "Does the online interaction between retail investors and firm management affect capital structure?," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002088
    DOI: 10.1016/j.frl.2023.103835
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    Cited by:

    1. Wang, Maochuan & Yan, Youliang, 2023. "The dark side of investor interactive platforms: Evidence from corporate investment efficiency," Finance Research Letters, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Retail investors; Investor interactive platforms; Information disclosure; Information asymmetry; Capital structure;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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