Governental Control, Stock Holding Of Institutional Investors And Financial Restatements

Since the first institutional investor borned in China, Institutional investors have deveolped quickly, evidence from statistics data displays that, the average investing ratio of institutional investors have reach to 49.59%. This ratio is so large that the securities and shareholders give great hope to them, they think institutional investors can descrease the probability of restatements occurrence and protect shareholders' right. However, with the investing ratio of institutional investors getting high, The phenomemon of financial restatements getting worse and worse. This pazzled people and cause them to rethink about the motivation and ability of institutional investors joined in corporate governance.In addition, Most of morden companys in our country are rooted in governental-oriented economic transition process and property rights reform, the vast majority of listed companies are restructured from state-owned enterprises, state-owned shares in listed companies take a large proportion, this causes the special phenomenon of state-owned shares "dominance" in listed companies. However, According to property rights theory, contract theory and other research findings, economists generally believe that compared to non-government controlled companies, the government- controlled enterprise resource allocation is more efficiency and productivity is lower. Therefore, when investigating China's institutional investors participation in the corporate governance, we must be combined them with the specific institutional context of China. As an impact of the important factors in the system level governance, whether government-controlled will affect the company's institutional investor shareholder activism behavior or not? Whether the Institutional investors' motivation and ability to supervise internal control and reduce the listed companies who conduct financial restatement different under the control of the government, and under the control of different government levels? This article attempts to answer these questions.Based on the informational level factors of financial restatements, This paper examines the shareholder activism behaviors of institutional investors under different ultimate shareholders. The results show that, generally, institutional investors can restrain the probability of restatements occurrence. This indicates that institutional investors can protect shareholders'rights. However, compared with listed companies which are non-governmentally controlled, the shareholder activism behaviors of institutional investors are limited more. Its effects on descreasing the probability of restatements occurrence and protecting shareholders'rights are worse and this situation maybe caused by local-governmental control on listed companies. It means that the institutional level factors of governmental control have significant impacts on the shareholder activism behaviors of institutional investors. This study extends research in corporate governance and financial restatements, and provides evidence to supervisors and investors in decision-making.This paper consists of six chapters. The first chapter is an introduction, describes the background, significance, related to definition of the concept and the main idea of research ideas; Second chapter reviews the research literature about the governmental control efficiency of institutional investors and ownership structure, In addition, I review the related evidence conclusion on financial restatements; The third chapter of this research introduces government controls theory and the different financial restatements background between United States and our country; The fourth chapter proposes our hypotheses, describes the sample selection and variable selection process; The fifth chapter shows the test and analysis of empirical results; The last chapter is the conclution.