Abstract
This paper investigates the relation between investor sentiment and firm innovation investment in China, and explores the intermediary role of institutional investors. We find that the impact of investor sentiment on innovation investment is quite different between state-owned enterprises (SOEs) and private-owned enterprises (POEs). Investor sentiment promotes the innovation investment of POEs, while inhibits SOEs. We also find that institutional investors play a positive intermediary facilitating role in POEs, mainly contributing by supervisor independent institutional investors. We do not find any role for institutional investors in SOEs.
Highlights
In the new round of global technological revolution, the competition of innovation industry in the world is becoming increasingly fierce
We find that the impact of investor sentiment on innovation investment is quite different between state-owned enterprises (SOEs) and private-owned enterprises (POEs)
Using a sample of 335 national-level innovative firms listed on China’s SSE and SZSE from 2006-2016, this paper studies the influence of investor sentiment on innovation investment activities of enterprises with different ownership in China and finds that investor sentiment promotes the innovation investment of POEs, while inhibits SOEs
Summary
In the new round of global technological revolution, the competition of innovation industry in the world is becoming increasingly fierce. High investor sentiment is more conducive to companies obtaining the capital they need in the equity market, which has a positive effect on their innovative investments. Does investor sentiment in the Chinese capital market play a positive role in promoting innovation investment? Can an independent institutional investor play a monitoring role in China, and what role does he play in investor sentiment influencing innovative investments in firms with different ownership, which is the question this paper seeks to answer. The findings of this paper will help developing and emerging capital markets to properly understand the role of investor sentiment in influencing corporate innovation.
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