Institutional Investors And Corporate Governance

This thesis analyzes one type of corporate governance mechanism i.e., monitoring by institutional investors. The research covers such areas as the motivation and effectiveness of the US and UK institutional investors' monitoring, the role of institutional investors in the US and UK corporate governance system, and the role of institutional investors in the governance of Chinese companies.In the past thirty years, the institutional investors have developed dramatically and become one of the most important forces on the majdr capital markets worldwide, especially the US and UK markets. Meanwhile, the institutional investors are playing an increasingly important role in the corporate governance in these two countries. Since the beginning of 1990s, the institutional investors have become one of the main corporate governance mechanisms, just as market for corporate control in the previous period. Institutional investor, as a corporate governance mechanism, has also become one of the significant subjects in the academic research of corporate governance.The past research in this area was mainly based on the theories of corporate governance and quantitative models. Due to the difference in the basic theories as well as models, there was obvious divergence in the past research regarding the two main topics i.e., the motivation and effectiveness of the US and UK institutional investors' monitoring. Meanwhile, due to the nature of complexity and dynamics in this area, the past research was not systematic and complete. Therefore, it is necessary to conduct a further study based on the results of the past research to provide a complete and balancing view on the subject. On the other hand, in China, the research on corporate governance focuses on internal governance. Furthermore, the research on external governance focuses on market for corporate control. There is no specific and systematic study of institutional investors. However, with a larger number of and more diversified institutional investors emerging in China, how to leverage institutional investors' monitoring to improve the governance of Chinese companies is a topic that may be meaningful to the future practice.The logic framework of this thesis is as follows. The starting point of the research is the US and UK corporate governance system. In this thesis, the corporate governance is divided into two types i.e., internal governance and external governance. The internal governance mechanisms include shareholders' meeting, board of directors, executive compensation, etc. while the external governance mechanisms include market for corporate control exit, factor markets and institutional investors, etc. In this thesis, the motivation as well as effectiveness of institutional investors' monitoring will be studied. In respect of the motivation of monitoring, a multi-factor model is established to analyze the internal factors and external factors that affect the willingness and intention of institutional investors. In respect of the effectiveness of monitoring, the effectiveness of various monitoring methods used by institutional investors and the effectiveness in various areas monitored by institutional investors will be analyzed separately. Based on this part, which is mainly quantitative analysis and on a micro level, the role and functionof institutional investors in the whole corporate governance system of US and UK are studied with qualitative analysis on a macro level. This macro-level analysis, which is under the frameworks of two basic corporate governance theories i.e., financial model and market myopic model, covers the relationships between institutional investors' monitoring and other corporate governance mechanisms, the features of institutional investors as an innovative governance mechanism, and the weaknesses of this mechanism, providing a more complete and in-depth understanding of institutional investors.Following the analysis of the US and UK institutional investors, the research on the role of China's institutional investors in corpor...