Institutional Shareholder: Theory, Practice & Policy Research

Institutional investor has several system effects. Nowadays, the development of institutional investor industry all around the world is showing the following three trends. Firstly, the community of institutional investors is still developing continuously and their behavior of global investment happens frequently day by day. Secondly, institutional investors prefer equity investment more and more. Thirdly, institutional investors' active participation becomes an important corporate governance mechanism gradually. Compared with that in the developed countries (regions), the development level of the institutional investors in China is obvious low and the task to develop Chinese institutional investors is so urgent. Therefore, the systematic study on institutional investors thoroughly has great theoretical and practical significance.The theoretic research reveals that institutional investors are decision-maker in essence and a decision system of high rationality, which preferring investment revenue and asking for satisfactory portfolios. Institutional investors become institutional shareholders naturally when investing the stock market. Institutional shareholders differ from the general corporation shareholders significantly in preferring stock attributes, the activity of pursuing revenue, the way to actualize equities, and so on. Stimulated by holding many shares, institutional shareholders are more effective in dealing with agency problems in the corporation, but also behave as opportunists sometimes. Institutional shareholders' behavior can be standardized by the relative system. The relationship between the development of institutional shareholders and the stock market is mutually beneficial.The common experience about the development of institutional shareholders all over the world is loosing regulation, strengthening supervision and improving the relative institutional environment. Although the Chinese institutional shareholders' operation inmarket is both praised and criticized, the positive analysis shows that they have comparatively strong ability to select stocks and consciousness of investment and evading risks. So their behavior meets "the Financing Principle of Prudence". China has comparatively more chances to develop institutional shareholders at present. When the formal constraints, informal constraints and implement mechanism can be removed properly, the golden age of institutional shareholders will come.