Institutional Investors And Corporate Governance Of Chinese Listed Company

Corporate governance is to choose proper contract arrangement to insure that claim to firm's residue is in proportion to rights of control. Ownership rights separating from operating rights is the intrinsically characteristic in listed companies, and this separation will consequentially lead to Principle-Agent problem, so owners of listed companies give their operating rights to the agent to running the companies. Unsymmetrical information, incomplete contracts, and the agent's activities being not seen directly will lead to the agents' moral risk and adversary choice, and the utility function between principle and agent is different. Just as the analysis of agent theory, managers of listed companies are economic man; they will pursuit the objective of their benefit maximizing. When this objective is different from the owners' objective, sacrificing the owners' benefit is a good selection to them. Corporate governance is necessary duo to agent problems, unsymmetrical information, incomplete contracts, and guaranteeing the investors' benefit comes to be the main problem in listed companies.But ownership structure in Chinese listed companies is illogical; state shares have a great proportion. Ownership structure is the base of corporation governance. It has a great effect on ways of control and operation as well as efficiency of corporate governance structure. State shares having a great proportion will distort the activities of stockholders of state shares, and the agent problem of state ownership has not been well solved, and the phenomena "owners are not in the place" is normal. The illogical state shares structure will consequentially lead to improper rights arrangement and invalid balance mechanism on governance structure in listed companies. 揟he owner is not in its place" lead to serious insiders' control, which will do harm to stockholders and other relative people. So bringing the institutional investors to corporate governance is a good way to solve the problems of "insiders' control".This paper begins from the status in quo of corporate governance in Chinese listed companies, analyses the problems of corporate governance in Chinese listed companies, puts forward bringing institutional investors to corporate governance, analyses the kinds, characteristic and functions of institutional investors as well as the international trend of functions of institution investors in corporate governance in companies and the case in listed companies in China. We also discuss the system obstacle and countermeasure of institutional investors participating in the corporate governance in listed companies.