Disentangling Active vs. Passive Mismatch: The Role of Retail Investor Sentiment in Shaping Corporate Capital Allocation—Evidence from China

Disentangling Active vs. Passive Mismatch: The Role of Retail Investor Sentiment in Shaping Corporate Capital Allocation—Evidence from China | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Disentangling Active vs. Passive Mismatch: The Role of Retail Investor Sentiment in Shaping Corporate Capital Allocation—Evidence from China Zhoupei Yang, Yuwei Liu, Yulu Han This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7259712/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Retail investors are the "capillaries" of the capital market and determine the fundamental vitality of the investment and financing market. Based on the data from Chinese A-share listed firms from 2008 to 2023, and utilizing incremental information from cash flow statements to identify corporate behaviors of "short-term borrowing for long-term investment"( SFLI) and "long-term borrowing for short-term investment,"( LFSI) this study employs a double machine learning model to examine the causal effect of retail investor sentiment on corporate investment-financing mismatch. results show that elevated retail investor sentiment significantly exacerbates corporate investment-financing mismatch. Compared to "short-term borrowing for long-term investment," sentiment changes have a more economically significant effect on "long-term borrowing for short-term investment" behaviors. Heterogeneity tests reveal that the influence of retail investor sentiment is more pronounced in non-state-owned enterprises, firms with higher ownership balance, lower audit fees and media scrutiny, higher information asymmetry, lower institutional ownership, and weaker resource capabilities. Mechanism tests indicate that retail investor sentiment aggravates corporate investment-financing mismatch by increasing managerial overconfidence and prompting more aggressive strategic decisions. This paper identifies the mechanism through which retail investor sentiment affects corporate investment-financing mismatch, constructs a framework distinguishing "active" and "passive" mismatches, supplements behavioral finance explanations for mismatch motivations, and provides a new perspective for understanding the impact of retail behavior on corporate resource allocation in China's capital market. Business and commerce/Business and management Social science/Business and management Business and commerce/Economics Social science/Economics Business and commerce/Finance Social science/Finance Investment-Financing Mismatch Investor Sentiment Double Machine Learning Irrational Behavior Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7259712","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":510201116,"identity":"a6033da9-750d-4bab-9669-0c097a9cbfb0","order_by":0,"name":"Zhoupei Yang","email":"","orcid":"","institution":"Chengdu University","correspondingAuthor":false,"prefix":"","firstName":"Zhoupei","middleName":"","lastName":"Yang","suffix":""},{"id":510201120,"identity":"0a170dc3-92c4-45c4-a0a8-287e66c98085","order_by":1,"name":"Yuwei Liu","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAwklEQVRIiWNgGAWjYBACPmYIzcPPwGAApJkJa2GDaZFsIFoLjGFwgGgt7Dxm0rxtNjLGxw9vk2CosE5sYD97gIDDwFrSeMzOpJVJMJxJT2zgyUsgQsu2wzxmN3jMJBjbDic2SPAYEKPlP4/xDJCWf8RrOcBjIAHS0kCUFrZiy7n/knkkzqQVWyQcSzdu48nBr4Wf//DGG2/O2NnztwMZH2qsZfvZz+DXAgQsEnBmAgNSTOEBzB+IUDQKRsEoGAUjGQAAlRQ09FmQeVkAAAAASUVORK5CYII=","orcid":"","institution":"Chengdu University","correspondingAuthor":true,"prefix":"","firstName":"Yuwei","middleName":"","lastName":"Liu","suffix":""},{"id":510201121,"identity":"1f6cefd9-d4b3-46bd-9d0f-930c6d40d422","order_by":2,"name":"Yulu Han","email":"","orcid":"","institution":"Chengdu University","correspondingAuthor":false,"prefix":"","firstName":"Yulu","middleName":"","lastName":"Han","suffix":""}],"badges":[],"createdAt":"2025-07-31 08:23:11","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7259712/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7259712/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":94730283,"identity":"6084cace-f680-4a4a-9c87-d9197c07edc5","added_by":"auto","created_at":"2025-10-30 07:05:49","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":509728,"visible":true,"origin":"","legend":"","description":"","filename":"article3.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7259712/v1_covered_289e0563-6833-4adf-8051-2b2291f81bdb.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Disentangling Active vs. Passive Mismatch: The Role of Retail Investor Sentiment in Shaping Corporate Capital Allocation—Evidence from China","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Investment-Financing Mismatch, Investor Sentiment, Double Machine Learning, Irrational Behavior\t","lastPublishedDoi":"10.21203/rs.3.rs-7259712/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-7259712/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eRetail investors are the \"capillaries\" of the capital market and determine the fundamental vitality of the investment and financing market. Based on the data from Chinese A-share listed firms from 2008 to 2023, and utilizing incremental information from cash flow statements to identify corporate behaviors of \"short-term borrowing for long-term investment\"( \u003cem\u003eSFLI)\u003c/em\u003e and \"long-term borrowing for short-term investment,\"( \u003cem\u003eLFSI)\u003c/em\u003e this study employs a double machine learning model to examine the causal effect of retail investor sentiment on corporate investment-financing mismatch. results show that elevated retail investor sentiment significantly exacerbates corporate investment-financing mismatch. Compared to \"short-term borrowing for long-term investment,\" sentiment changes have a more economically significant effect on \"long-term borrowing for short-term investment\" behaviors. Heterogeneity tests reveal that the influence of retail investor sentiment is more pronounced in non-state-owned enterprises, firms with higher ownership balance, lower audit fees and media scrutiny, higher information asymmetry, lower institutional ownership, and weaker resource capabilities. Mechanism tests indicate that retail investor sentiment aggravates corporate investment-financing mismatch by increasing managerial overconfidence and prompting more aggressive strategic decisions. This paper identifies the mechanism through which retail investor sentiment affects corporate investment-financing mismatch, constructs a framework distinguishing \"active\" and \"passive\" mismatches, supplements behavioral finance explanations for mismatch motivations, and provides a new perspective for understanding the impact of retail behavior on corporate resource allocation in China's capital market.\u003c/p\u003e","manuscriptTitle":"Disentangling Active vs. Passive Mismatch: The Role of Retail Investor Sentiment in Shaping Corporate Capital Allocation—Evidence from China","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2025-09-08 14:22:15","doi":"10.21203/rs.3.rs-7259712/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"1dc82860-9b9e-43f3-9f96-8435feef7d9a","owner":[],"postedDate":"September 8th, 2025","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[{"id":54191998,"name":"Business and commerce/Business and management"},{"id":54191999,"name":"Social science/Business and management"},{"id":54192000,"name":"Business and commerce/Economics"},{"id":54192001,"name":"Social science/Economics"},{"id":54192002,"name":"Business and commerce/Finance"},{"id":54192003,"name":"Social science/Finance"}],"tags":[],"updatedAt":"2025-10-30T05:39:02+00:00","versionOfRecord":[],"versionCreatedAt":"2025-09-08 14:22:15","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-7259712","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-7259712","identity":"rs-7259712","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}