Institutional Investor Heterogeneity, Private Communication And Corporate Governance

Theoretically institutional investors with the advantages of asset management,market information and professionals staff have the ability and willingness to supervise firm's managers,to make up for the failure of the board of directors due to lack of independence.Institutional investors' shareholder activism in the United States and the governance effect of the developed capital market and the latest revision of the G20 / OECD Corporate Governance Principles(2016)also affirm the important role of institutional investors in corporate governance practice.Due to the factors such as the concentration of equity of listed companies and the degree of investor protection,Chinese institutional investors have less success stories in the use of shareholder proposals,shareholders' voting and legal litigation,and private conversation has become the main mechanism in the participation of listed companies External mechanism,was normalized.But limited by the availability of data,domestic research is rare.This paper explores the private conversation between institutional investors and the management of the company,which can enrich the external mechanism of corporate governance research.The classification studies are heterogeneous and conform to the status quo of the diversification of institutional investors in China.It is clear that different types of institutional investors have different willing and ability to supervise the management of listed companies.In addition,it is of practical significance to test the effect of private conversation on the truth of disclosure of information and the value of the company to the listed company.It is of great significance to promote the role of institutional investors in the governance of listed companies.This paper focuses on theoretical research and empirical research.First,it is to study the logic and mechanism of private conversation impacting corporate governance and firm's value.Second,the institutional investors heterogeneity(holding size,investment restrictions,funding sources and investors Appropriateness,profit model,incentive mechanism)and its influence on the depth and breadth of private conversation.Third,institutional investors through information communication and identification,increase the quantity of information and improve the quality of information through private conversation(the main way is site visit)to verify the impact of private conversation between different institutional investors on the authenticity of the company's disclosure of information.Fourth,institutional investors through private conversation to convey the recommendations and share information to improve management and corporate performance,examine the different institutions of private investors to find the value of private conversation or value creation function.Based on the study of private conversation between different types of institutional investors,it finds following conclusions.Referring to the institutional investors' conversation with the management of the company,financial analysts providing the listed company research report(including the stock information),public funds holding largest A-shares,private equity funds with incentive mainly based on performance significantly increase the depth of private conversation,public funds and private equity funds significantly expand the breadth of private conversation,and other institutional investors have no significant impact on the depth or breadth of private conversation At the same time,the core management of listed companies(the chairman of BOD or general manager)for different types of institutional investors in private conversation,different types of communication matters are significantly different degree of interaction: the core management of listed companies will pay more attention to financial analysts and public funds.Referring to market and industry,core strategy and significant investment,the core management will increase the probability of participation in the interaction,showing its initiative to communicate with shareholders on important issues to gain understanding and support.Referring to the institutional investors' private conversation and earnings management,institutional investors as a whole can limit the management of listed companies to manage the accrued earnings management,but at the same time forces it to take a more covert real earnings management,which is difficult to be found.Private equity,financial analysts,public funds and insurance companies to limit accrual earnings management rather than the real earnings management of the inhibitory effect is significant,but the size of the regression coefficient and significant degree of significant are difference.Other institutional investors are difficult to play a similar role through the external governance mechanism.The depth and breadth of private conversation can simultaneously curb accrued earnings and real earnings management activities,to a certain extent verifying the positive role of the "effective" site visiting(rather than the number of forms)and "real" supervision of information disclosure.Referring to the institutional investors' private conversation on firm value,as a homogeneous whole,institutional investors' private conversation with the management of the companies have both value-selection and value-creation functions.Further distinguishing between different types of institutional investors,it finds that the public fund contributes the most.Financial analysts,private equity funds and QFII have only single function of value-selection or value-creation,and the private conversation by other institutional investors has no significant effect.The breadth and depth of private conversation have significant effect on the value judgment of institutional investors to increase the quantity of information and improve the quality of information.However,the research concludes support to significant effect of private conversation rather than depth on the performance improvement of listed companies.The core management of listed companies involved in private conversation will have a positive impact on corporate value,which is also in line with investor relations management to enhance business performance theory.Based on the data collected from 7430 investor relations activity records of Shenzhen Stock Exchange SME listed companies from 2013 to 2015,it is the first domestic measurement of Chinese institutional investors to participate in corporate governance in the main external mechanism,i.e.,private conversation,and it test its governance effect.It is the first proposed private conversation depth and breadth of the concept which can be used to directly measure the quantity and quality of information interacting between institutional investors and the company management,and which can also be as indicators of listed companies' voluntary information disclosure.Based on the heterogeneity of institutional investors,it is necessary to examine the value selection or value creation function of different types of institutional investors in private conversation.It is a quite meaningful to discuss high-quality listed companies to attract institutional investors or institutional investors to create value for listed companies.