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Rational catering of irrational emotions: Investor sentiment and executive tone

In China, investors generally make decisions depending on the intonation of executive announcements. A total of 20,328 observations are sampled from the Chinese equity market between 2005 and 2019. We perform principal component analysis to produce monthly sentiment indices and calculate the weighte...

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Autores principales: Qiu, Jing, Yang, Ni
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Frontiers Media S.A. 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9513454/
https://www.ncbi.nlm.nih.gov/pubmed/36176805
http://dx.doi.org/10.3389/fpsyg.2022.987310
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author Qiu, Jing
Yang, Ni
author_facet Qiu, Jing
Yang, Ni
author_sort Qiu, Jing
collection PubMed
description In China, investors generally make decisions depending on the intonation of executive announcements. A total of 20,328 observations are sampled from the Chinese equity market between 2005 and 2019. We perform principal component analysis to produce monthly sentiment indices and calculate the weighted average of the value over the fiscal year to measure the degree of investor sentiment. The results of the empirical analysis reveal that: (1) there is a significant positive correlation between market-level investor sentiment and executive tone, (2) stock price and trading-volume pressures on executives, and firm-level investor expectation and gambling tendency positively moderate the relationship between investor sentiment and executive tone, (3) executive optimism does not mediate the association between investor sentiment and executive tone, and (4) manipulated and real intonations are non-homogeneous tactics adopted by rational managers to cater to changes in investor sentiment. These findings indicate that executives' intonations are both an extension of firms' current and past performances and managers' decision-making based on sentiments and behaviors of irrational investors, which are consistent with the Catering Theory. In addition, rational executives tend to adopt various intonation tactics to respond to investor sentiment to avoid declines in stock prices and trading volumes.
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spelling pubmed-95134542022-09-28 Rational catering of irrational emotions: Investor sentiment and executive tone Qiu, Jing Yang, Ni Front Psychol Psychology In China, investors generally make decisions depending on the intonation of executive announcements. A total of 20,328 observations are sampled from the Chinese equity market between 2005 and 2019. We perform principal component analysis to produce monthly sentiment indices and calculate the weighted average of the value over the fiscal year to measure the degree of investor sentiment. The results of the empirical analysis reveal that: (1) there is a significant positive correlation between market-level investor sentiment and executive tone, (2) stock price and trading-volume pressures on executives, and firm-level investor expectation and gambling tendency positively moderate the relationship between investor sentiment and executive tone, (3) executive optimism does not mediate the association between investor sentiment and executive tone, and (4) manipulated and real intonations are non-homogeneous tactics adopted by rational managers to cater to changes in investor sentiment. These findings indicate that executives' intonations are both an extension of firms' current and past performances and managers' decision-making based on sentiments and behaviors of irrational investors, which are consistent with the Catering Theory. In addition, rational executives tend to adopt various intonation tactics to respond to investor sentiment to avoid declines in stock prices and trading volumes. Frontiers Media S.A. 2022-09-13 /pmc/articles/PMC9513454/ /pubmed/36176805 http://dx.doi.org/10.3389/fpsyg.2022.987310 Text en Copyright © 2022 Qiu and Yang. https://creativecommons.org/licenses/by/4.0/This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
spellingShingle Psychology
Qiu, Jing
Yang, Ni
Rational catering of irrational emotions: Investor sentiment and executive tone
title Rational catering of irrational emotions: Investor sentiment and executive tone
title_full Rational catering of irrational emotions: Investor sentiment and executive tone
title_fullStr Rational catering of irrational emotions: Investor sentiment and executive tone
title_full_unstemmed Rational catering of irrational emotions: Investor sentiment and executive tone
title_short Rational catering of irrational emotions: Investor sentiment and executive tone
title_sort rational catering of irrational emotions: investor sentiment and executive tone
topic Psychology
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9513454/
https://www.ncbi.nlm.nih.gov/pubmed/36176805
http://dx.doi.org/10.3389/fpsyg.2022.987310
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