Top management team demography, investor sentiment, and the investment levels of listed companies^*

* Accepted by Arijit Mukherjee.

Abstract

The perceptions and decisions of securities investors in capital markets are not fully rational. Therefore, ‘smart’ managers of listed companies may cater to the irrational sentiments of investors by making catering investments to raise short-term stock prices. In this research, the top management team (TMT) demography that affects managers’ cognitive base and values is studied to analyze its moderating effects on the impacts of investor sentiment on corporate investment levels. The results show that the level of corporate investment to cater for investor sentiment decreases as the TMT’s age increases, and high TMT education levels can reduce the impacts of investor sentiment on corporate investment decision-making. However, the tenure of the TMT has no effect on companies’ catering investments.

Keywords:

• Top management team demography
• investor sentiment
• investment levels of companies
• moderating effects

Notes

* Accepted by Arijit Mukherjee.

1. There are three types of moderator variables. A homologizer variable influences the strength of the relationship, does not interact with the predictor variable, and is not significantly related to either the predictor or dependent variable. A pure moderator variable interacts with the predictor variables but has a negligible correlation with the dependent variable. If a proposed moderator is also a predictor variable, it is a quasi moderator (Sharma, Durand, and Gur-Arie 1981; Li and Li 2008).