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The impact of herding behaviour of Chinese securities investment funds on firm value: the mediating effects of stock price informativeness and agency cost

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  • Liang Wang
  • Xianyan Xiong

Abstract

This paper investigates the impact of herding behaviour of Chinese Securities Investment Funds (SIFs) on firm value by taking stock price informativeness and agency cost as intermediary variables. It constructs LSV model to measure herding behaviour of SIFs, and develops logarithmic conversion method of the goodness-of-fit to characterize stock price informativeness. The stepwise regression method is employed for empirical analysis and it is found that: (i) The herding behaviour of SIFs significantly negatively affects the stock price informativeness, and the former is ‘intentional herding’ that ignores personal private information. (ii) The stock price informativeness is positively related to firm value, while agency cost has a significant negative influence on firm value. (iii) The stock price informativeness and agency cost play significant partial mediating effects between the herding behaviour of SIFs and firm value, respectively.

Suggested Citation

  • Liang Wang & Xianyan Xiong, 2022. "The impact of herding behaviour of Chinese securities investment funds on firm value: the mediating effects of stock price informativeness and agency cost," Applied Economics Letters, Taylor & Francis Journals, vol. 29(14), pages 1248-1255, August.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:14:p:1248-1255
    DOI: 10.1080/13504851.2021.1923633
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