image: First, retail investors’ initial investment expectations are generated based on fundamental company information communicated through official releases and market noise information through channels other than online platforms. Second, retail investors may adjust their investment expectations based on feedback obtained through replies and discussions with other investors on online platforms. The iterative process of online opinion exchange and information filtering continuously refines their perceptions of target companies, potentially influencing their investment expectations (Hirshleifer et al., 2025). Finally, target companies may adjust their corporate strategy. If retail investors choose to maintain or increase their holdings based on their updated investment expectations, a governance effect may occur, i.e., target companies are encouraged to adopt long-term strategies, such as green investments. Conversely, if investors sell or reduce their holdings, a market pressure effect may be triggered, potentially leading companies to prioritize short term gains.
Credit: Hongjie Zhang and Feng He (University of Science and Technology Beijing, China) Taoyuan Wei (CICERO Center for International Climate Research, Norway) Yingming Zhu and Yao Zhang (Nanjing University of Science and Technology, China) Lili Yan (University of Greenwich, UK)
Background and Motivation
In recent years, green investment has become an imperative for Chinese corporations striving to align with national climate goals such as “carbon peak by 2030” and “carbon neutrality by 2060.” While environmental, social, and governance (ESG) metrics are increasingly mainstreamed, China’s capital market remains dominated by retail investors, who account for over 99% of A-share investors. With the rise of digital forums like Eastmoney’s Stock Bar, these investors can collectively voice short-term financial concerns, potentially steering companies away from long-term, sustainability-driven strategies. Recognising this emerging power dynamic, researchers sought to explore: Do retail investor concerns expressed online inhibit corporate green investment intentions? China Finance Review International (CFRI) brings you a new study titled “Impact of online opinions: Do retail investor concerns inhibit corporate green investment intentions?” which investigates this very question with empirical rigour.
Methodology and Scope
The study employs a high-dimensional panel regression model using annual data from over 35,000 observations of Chinese A-share listed companies (2010–2022). Corporate green investment intentions are captured through an innovative machine learning-based keyword frequency index, derived from annual report texts. Retail investor sentiment is measured using post volumes from China’s largest investment forum. The research incorporates a range of endogeneity and robustness tests, including instrumental variable methods, PSM, and difference-in-differences approaches.
Key Findings and Contributions
- Online Investor Sentiment Suppresses Green Investment Intentions: The study reveals a significant negative relationship between retail investor concerns expressed on stock forums and the level of corporate green investment intention. Firms appear to defer or reduce their green initiatives when facing intensive scrutiny or dissatisfaction from online retail investors.
- Stage-Specific Inhibitory Effects: The inhibitory impact of online sentiment is most pronounced in the early phases of green investment, such as pollution prevention and process upgrades, suggesting investor pressure is strongest where returns are uncertain or long-term.
- Negative Sentiment Drives the Effect: While both positive and negative sentiments influence firms, it is the prevalence of negative online opinions that substantially discourages green investment activities.
- Credibility of Corporate Information as a Buffer: The study finds that firms with higher information transparency and credibility—evidenced by strong investor relations, high-quality disclosures, or Big Four audits—are better insulated from the negative influence of retail investor sentiment.
- Diverging Effects on Innovation: Interestingly, while green investment intentions are suppressed, retail investor pressure may actually encourage green innovation (e.g., patent output), indicating a nuanced divergence in investor influence on tangible versus intangible green efforts.
Why It Matters
As climate imperatives grow more urgent, understanding how capital markets either support or suppress corporate sustainability is critical. In markets like China, where retail investors wield outsized influence, this research provides the first robust evidence that online sentiment may actively shape (and constrain) firms' environmental decision-making. It also informs the broader debate on how digital platforms reconfigure traditional governance dynamics between corporations and their stakeholders.
Practical Applications
- For Researchers: Introduces a novel method to quantify green investment intentions using text mining and grounded theory. Expands the analytical framework for understanding retail investor influence beyond institutional channels.
- For Investors: Reveals the collective power of online retail sentiment in influencing corporate ESG behaviour. Encourages a reassessment of how long-term value is communicated and perceived in investor communities.
- For Policymakers: Supports policies aimed at improving retail investor education and promoting long-term investment culture. Suggests that enhancing corporate information transparency may mitigate harmful short-termism.
- For Companies and Bankers: Offers a roadmap for improving investor relations through higher disclosure quality and proactive online engagement. Informs banks assessing corporate ESG risks that online investor sentiment may affect firms' green strategies.
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Journal
China Finance Review International
Article Title
Impact of online opinions: Do retail investor concerns inhibit corporate green investment intentions?
Article Publication Date
5-Jun-2025