Individual Investor Sentiment and Cost of Equity Capital——Analysis based on Behavioral Finance Perspective
Based on the perspective of behavioral finance,taking listed companies in Shanghai and Shenzhen A-shares as research samples,this paper empirically explores the relationship between individual investor sentiment and the cost of equity capital,the specific mechanism path,and the heterogeneous impact of accounting information transparency and institutional shareholding ratio on the relationship between individual investor sentiment and the cost of equity capital.The empirical results are as follows.First,the high sentiment of individual investors can significantly reduce the cost of equity capital;further research finds that stock liquidi-ty is the mechanism path that individual investor sentiment affects the cost of equity capital,and the reduction effect of individual investor's high sentiment on the cost of equity capital will reverse in the future.Second,the heterogeneity test found that institu-tional investors with high shareholding ratio and higher accounting information transparency can help individual investors build in-vestment confidence,strengthen the negative correlation between individual investors'high sentiment and the cost of equity capi-tal,and can also serve as a"reassuring pill"to weaken the negative impact of individual investors'high sentiment on the cost of eq-uity capital in the future.The findings of this paper have expanded the research on the economic consequences of individual inves-tors'emotions and the factors affecting the cost of equity capital,and provided a realistic indication for the relevant departments of the CSRC,enterprises and large financial service institutions to reasonably guide individual investors'emotions to ensure the nor-mal operation of the stock market.
individual investor sentimentcost of equity capitalbehavioral finance