The Influence of Irrational Market on Company Investment; --Based on the empirical work of real estate listed companies in China

We use the methods and indexes according to the paper published in 2003 written by Baker, Stein and Wurgler, which does empirical work for the American capital market. By studying the data from financial statements of 66 listed real estate companies, we can obtain: strong equity-dependent companies have a sensitivity of investment to stock price that is 3.33 times as large as weak equity-dependent companies; The company investment behaviors and stock price is positively correlated, moreover, the correlation is more pronounced than that of American market. The irrational capital market in China has an impact on company investment, especially on the equity-dependent companies. Furthermore, influence is more remarkable than that of American market. This paper also studies the relationship between cash flow and company investment behavior. As a result, the sensitivity of investment to cash flow almost keeps the same for the companies of different equity-dependence.