Corporate Governance and the Relation between Investor Sentiment and Corporate Investment Decisions

Abstract

The aim of this paper is to examine the effect of corporate governance on the relation between investor sentiment and corporate investment decisions. For this purpose, a sample of 106 firms listed in Tehran Stock Exchange during 2009 to 2014 is examined. This study uses Corporate Governance Index derived from a check list which contains twenty-one questions. To analyze data and test hypotheses, the multivariate regression model based on panel data is used. Findings show that investor sentiment has a significant effect on new investments and overinvestment level. Also, Corporate Governance Index has a significant impact on the relation of investor sentiment to new investment and overinvestment. In other words, in firms with a higher level of corporate governance, investor sentiment effect on corporate investment decisions is improved.

Keywords

• Corporate Governance
• Investor Sentiment
• Investment Decisions
• Overinvestment