Linking Investors’ Crowd Psychology, Credit Financing and Corporate Investment Efficiency

  • Sarfaraz Ahmed Bhutto, Zulfiqar Ali Rajper, Jai Kishan,


This study explores the effect of investors’ crowd Psychology on the corporate investment
efficiency of the selected sector companies of Pakistan’s stock exchange with the intervening effect
of credit financing. Mainly, four sectors, among which only 13 public listed companies are
selected. Panel techniques are used and data is collected from the published financial reports of
the companies of last 10 years (2010 to 2019). Share turnover is used to examine the investors’
crowd Psychology. This study discovers that there is a positive relationship between the investors’
crowd Psychology and over-investment of the organizations and vice versa, while investors’
crowd Psychology have a significant impact on investment efficiency with the partial mediating
role of credit financing but only in case of underinvestment. Investors’ crowd Psychology do have
a significant effect on overinvestment but it is not due to the mediating role of credit financing.
Due to the optimistic investors’ crowd Psychology, the credit supply is increased, but firms would
have more funds to invest which may cause abuse of corporate funds, but due to strong supervision
functions, this problem is also reduced.