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Open AccessArticle

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

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Department of Commerce and Finance, Faculty of Arts and Social Sciences, Government College University Lahore, Lahore 54000, Pakistan
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School of Economics and Management, Yanshan University, 438, Hebei Avenue, Qinhuangdao City 066004, China
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Department of Commerce, Faculty of Management Sciences, University of Kotli, Village Kurti, City Kotli, Azad Jammu and Kashmir 11100, Pakistan
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WorkWell Research Unit, North-West University, Faculty of Economic and Management Sciences, School of Management, Vanderbijlpark 1900, South Africa
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TRADE Research Entity, North-West University, Faculty of Economic and Management Sciences, Vanderbijlpark 1900, South Africa
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University of Debrecen, Faculty of Economics and Business, Institute of Applied Informatics and Logistics, 4032 Debrecen, Hungary
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Author to whom correspondence should be addressed.
Sustainability 2019, 11(20), 5583; https://doi.org/10.3390/su11205583
Received: 29 August 2019 / Revised: 22 September 2019 / Accepted: 27 September 2019 / Published: 10 October 2019
Equity markets play a pivotal role in the sustainability of developing countries, such as China. The literature on the detection of herding biases is confined to the aggregate level (firms, sector/industry and market). The present study adds to the behavioral finance literature by addressing the surprisingly unnoticed phenomena of the behavioral impact of herding bias on firm value (FV) at the firm level, using the sample of A-Shares listed firms at the Shanghai and Shenzhen Stock Exchanges (SSE and SZSE) under panel fixed effect specification. Initially, we detect the existence of investors and managers herding (IHR and MHR) biases at firm-level, and later, we examine their impact (distinct and interactive) upon the FV. The empirical results document the presence of IHR and MHR bias at market, sector and firm-level in both equity markets, which potentially drive the FV, while the impact is more pronounced during the extreme trading period. The findings are robust under different time intervals, and industry classification, therefore, offers useful policy implications to understand the behavioral dynamics of investors and managers. View Full-Text
Keywords: Investor herding bias; manager herding bias; firm value; Shanghai stock exchange; Shenzhen stock exchange Investor herding bias; manager herding bias; firm value; Shanghai stock exchange; Shenzhen stock exchange
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Shah, S.S.H.; Khan, M.A.; Meyer, N.; Meyer, D.F.; Oláh, J. Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market. Sustainability 2019, 11, 5583.

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