Institutional Investor's Shareholding And Corporate Performance

During the more than 10 years of China capital market's development, it has always been troubled by corporate governance of listed companies. As controlling shareholders'equity is highly concentrated and stock rights are divided, China's listed companies are faced with serious insider controlling problems. The external and internal corporate governance mechanisms all lose their due monitoring functions. Being the third party between controlling shareholders and individual shareholders, institutional investors have advantages in size, information and personnel, and can overcome the hitch hike problem faced by individual shareholders, so that their shareholding can improve corporate governance and performance. But there are also important differences between different institutional investors, which will influence their objective functions and lead to their different impacts on corporate governance and performance.Combined with theoretic research, qualitative and quantitative methods, the dissertation studied the impacts of the whole and different institutional investors on corporate performance. The dissertation made a literature review of the institutional investor's shareholder activism, shareholder passivism and the compromising view. Combined with agency theory and property theory, the dissertation analyses the role of institutional investors'shareholding in corporate governance, and bring forward the research design; then analyses the current situation and shortcoming of the corporate governance of China's listed corporate, then reviewed the development of western country's institutional investors and their promotion of corporate governance. The dissertation also analysis the current situation and defects of China's institutional investor, and looked back some cases China's institutional investor taking part in corporate governance. Then the dissertation made empirical studies of the impact of the whole and different institutional investor's shareholding on equity cost and corporate discretionary investment, and made empirical studies on the role of the whole and different institutional investor's shareholding in corporate performance based on the former two studies. At last summarizes the whole dissertation.The main results in the dissertation are:(1) by the theoretical level:China's institutional investor can be divided into two group based on their business relation with their portfolio companies and their property character. (2) by the empirical level: Firstly, as independent institutional investor, mutual funds can reduce equity costs, promote corporate discretionary investment, and improve corporate performance. But as non-independent institutional investors, social security funds and insurance funds can't do the same. What's more, social security funds'shareholding has negative impacts on corporate value. Independent institutional investors dominating China's institutional investor is the main reason why China's institutional investors improve corporate governance and performance. Secondly, the impacts of institutional investor's shareholding on corporate systematic risk and discretionary investment verify that China's institutional investors are rational but not myopic investors.