Chunxiao Xue
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The impact of investor sentiment on stock liquidity of listed companies in China
Investment Management and Financial Innovations Volume 21, 2024 Issue #2 pp. 1-14
Views: 123 Downloads: 20 TO CITE АНОТАЦІЯResearchers have scrutinized the link between investor sentiment and stock market liquidity globally, yet few have delved into this dynamic in emerging markets, especially China. Utilizing a sample of 1,839 publicly listed companies in China from 2010 to 2019, this study applies firm- and year-fixed-effects models to explore the nexus between investor sentiment and stock illiquidity, employing the Amihud measure for stock illiquidity assessment. The outcomes of these fixed-effect regressions illustrate a significantly positive relationship between investor sentiment and stock liquidity in the Chinese market. The positive link is more evident in scenarios characterized by high firm leverage, rapid revenue growth, larger corporations, greater institutional ownership, higher stock volatility, and lower book-to-market ratios. Intriguingly, this analysis incorporates the quadratic term of investor sentiment to examine the potential for a nonlinear dynamic between stock illiquidity and investor sentiment. The findings elucidate that the effect of investor sentiment on stock liquidity diminishes at elevated levels of sentiment, revealing a nonlinear inverse U-shaped relationship. The positive correlation between investor sentiment and stock liquidity persists across the three divisions of the Chinese Shenzhen Stock Exchange and remains robust using alternative liquidity measures, such as Roll’s impact and zeros impact. Addressing causality concerns, current investor sentiment appears to influence subsequent liquidity levels. These results provide valuable perspectives for policymakers, business executives, and investors in the stock market.
Acknowledgment
This research was funded by the Department of Education of Zhejiang Province General Program [Y202353438], the Wenzhou Association for Science and Technology—Service and Technology Innovation Program [jczc0254], the Wenzhou-Kean University Student Partnering with Faculty Research Program [WKUSPF2023004], and the Wenzhou-Kean University International Collaborative Research Program [ICRP2023002]. -
ESG ratings and stock performance in the internet industry
Lan Wang , Zhenyuan Weng , Chunxiao Xue , Jianing Zhang doi: http://dx.doi.org/10.21511/imfi.21(1).2024.04Investment Management and Financial Innovations Volume 21, 2024 Issue #1 pp. 38-50
Views: 401 Downloads: 50 TO CITE АНОТАЦІЯAmidst the escalating emphasis on sustainable development, numerous corporations and organizations have intensified their environmental, social, and governance (ESG) efforts. The internet sector, intrinsically linked to the ESG domain, has consequently garnered amplified scrutiny. This study delves into the correlation between ESG ratings and the stock performance of publicly listed Chinese companies in the internet sector from 2016 to 2020. The findings reveal that initiatives in the ESG sphere significantly and negatively influence stock performance in these firms, assessed through raw stock returns, stock excess returns relative to the market index, Jensen’s one-factor alpha, and the Fama-French three-factor alpha. This inverse correlation between ESG ratings and stock performance is nonlinear and convex, indicating a lessening negative impact at elevated ESG levels. Moreover, this adverse effect is more pronounced in value stocks compared to growth stocks. Predominantly manifesting before 2018, this negative trend diminishes amidst the COVID-19 period. The reverse causality analysis employing lagged ESG ratings suggests that higher ESG ratings precipitate reduced stock performance, as opposed to vice versa. This study bridges a gap in the existing literature concerning ESG and stock performance specific to the Chinese internet industry and proposes recommendations for its sustainable evolution.
Acknowledgment
This research was supported by the Department of Education of Zhejiang Province General Program (Y202249981, Y202353438), the Wenzhou Association for Science and Technology – Service and Technology Innovation Program (jczc0254), the Wenzhou-Kean University Student Partnering with Faculty Research Program (WKUSPF2023004), the Wenzhou-Kean University International Collaborative Research Program (ICRP2023002, ICRP2023004), and the Wenzhou-Kean University Internal Research Support Program (IRSPG202205, IRSPG202206).
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