Abstract
Investor sentiment does not only have negative impacts. It may also improve green total factor productivity by invigorating funds. This research constructs a new indicator at the firm level to measure the green total factor productivity of firms. We research the effect of investor sentiment on firms' green total factor productivity using a sample of Chinese heavy polluters listed on Shanghai and Shenzhen A-shares between 2015 and 2019. Through a series of tests, the mediating role of agency costs and financial situations is confirmed. It is discovered that the digitization of businesses facilitates the effect of investor sentiment on the green total factor productivity of businesses. And when managerial competence reaches a certain threshold, the impact of investor sentiment on green total factor productivity is amplified. Tests for heterogeneity reveal that high investor sentiment has a larger impact on green total factor productivity in firms with superior supervision.
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