Share Centralization, Investor Sentiment and Firm Performance

Abstract

The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm's operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm's net income instead of accrual earnings, this paper reflects the "visible" accounting number to represent investors' received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm's net income, the managers should devote to better earnings for borrowing equity capital when the firm's debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm's prospect to the outside investors, the board might hold on its share right inside of the firm.

Investors’ sentiment and stock trading in the Nigerian capital market

“…This is an indication that investors are not always rational in Nigeria, and their irrational investment decision significantly influences stock trading in the country. This result agrees with studies that found significant positive relationship between investors' sentiment and stock performance among emerging and developing countries (Dalika &Yudhvir, 2015;Asian Naik & Padhi, 2016;Alajekwu, Obialor, Okoro & Ibenta, 2017;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019). On the other hand, the finding from this study disagrees with studies that found no significant relationship between investors' sentiment and stock trading (Zainudin, Zaki, Hadi, Hussain & Kantakji, 2019).…”

“…The birth of behavioural finance (otherwise behavioural economics) in the 1990s has been on the rise in empirical literature that has sought to determine whether stock trading is driven by investors' sentiments. There is a consensus in the literature that sentiment influences market performance among emerging markets (Dalika &Yudhvir, 2015;Naik &Padhi, 2016;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019). These studies corroborate findings from Alajekwu, Obialor, Okoro and Ibenta (2017) which found that sentiment significantly influences market performance in Nigeria.…”

“…Empirical literature also shows that investor sentiment plays an important role in market performance determination. Studies across Africa (Bennet, Amoako, Charles, Edward &Darkwah, 2012;Dalika&Yudhvir, 2015;Alajekwu, Obialor, Okoro &Ibenta, 2017), and in Asia (Naik&Padhi, 2016;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019) confirmed that investor sentiment significantly influences market performance. However, few studies in China (Huang, Yang, Yang & Sheng, 2014).…”

Centralization and Firm Performance: New Evidence on the Role of Firm Size

“…For linear correlation theory, views differ. Some researchers, such as Heitor [7], and Cheng [8], hold the positive linear correlation theory view that centralized management can significantly drive firm performance. For views in favor of negative linear correlation, studies such as Mauricio J et al (2019), Madhavi et al (2016), and Madhavi et al (2016) argue that removal of corporate centralization can raise the efficiency of investments and improve firm performance.…”

Time Series Dynamics of Short Term Interest Rates in Turkey

“…Short-term interest rate changes occur in response to developments in the economy in terms of both domestically and internationally such as local or international economic and political crises, changes in central bank policy rate, inflation, and expectations for economic growth (Joslin & Konchitchki, 2018). On the other hand, it is widely accepted that changes in short-term interest rates also have an impact other macroeconomic variables such as economic growth, unemployment and balance of payments.…”