A Research Of Institutional Investors' Shareholdings' Effect To The Performance Of Chinese Listed Firms

Agency conflicts of listed companies,in emerging stock markets,are mainly characterized as the one between the major shareholders and the small shareholders,due to poor investor protection.The expropriation of major shareholders on minority shareholders has hindered the healthy development of China's securities market.Authorities of Chinese stock market,learning from mature States,advance the development of institutional investors,represented by the securities investment funds.Since the first batch of securities investment funds been introduced in 1998,China'institutional investors have experienced the "golden period" for 15 years.By the end of 2012,China's institutional investors hold the shareholdings of 2032 firms,83 per cent of the total shares of listed companies,valued at $ 9.06 trillion,accounting for 34 per cent of the total market value.Nowadays,the institutional investors have become an important force in the largest stock market funds.A important issues of common concern is,whether institutional investors contributed to improving the company's performance,and whether different type of institutional investors has heterogeneous effect.Based on existing research on Chinese firms,we constructs a theoretical model and several empirical researches to examine whether institutional investors' shareholdings contributed to improving the company's performance.The main conclusions are as follows.First,by building a theoretical model,we reveal the micro-mechanism of institutional investors to improve the performance of its stock ownership company.Learning from Albuquerue and Wang(2008),in this paper we construct a theoretical model of corporate finance with the participation of institutional investors.We confirmed that the higher the proportion of institutional investors holding,the more restraint to the insider' breaches,so as to improve the company's performance.Second,with the Chow test,we confirmed that during different stages of Chinese institutional investors' development,there is a structural change of the role of institutional investors to improve the company's performance.Third,using quantile regression model and coefficients-comparing models,we found the heterogeneous effect of institutional investors' holding.When the company performance is at a high level or a low level,there will be more significant improvement of institutional investors' shareholdings on the company's performance.As the main two institutional investors,funds have more significantly effect to the firm than the legal person.Fourth,using agency cost,relation trade and information disclosure,we found the positive effect of institutional investors' holding.When the company performance is at a high level or a low level,there will be more significant improvement of institutional investors' shareholdings on the company's performance.On the basis of the above findings,we make relevant policy recommendations for the development of institutional investors,includes:strengthening the supervision of institutional investors and listed companies' decision-making mechanisms,improving industry associations' operating mechanism,improving the industry regulator,optimizing the incentive mechanism of fund managers,advancing the corporate fund,and so on.