An Empirical Study On The Relativity Of Institutional Shareholder And Corporate Governance Performance

After 1980's, the institutional investors of developed countries developed faster and faster. The ownership structure of listed companies has changed from dispersal into relative concentration. The investment strategy of institutional shareholder also changed from'arms length'into'control-oriented'. Consequently, this change induced the uncontrolled'Berle-Means'administrator leading type convert into investors leading type controlled by institutional shareholders. It was called by Drunker as an'unseen revolution', also called as institutional shareholder activism rising. The ownership structure of Chinese listed company is irrational: lower proportion of circulating shares and lonely state-owned shares. The market law and code is fault. Both of this bring serious problem on the corporate governance. Institutional investors of our country are in a flourish development lately. Using the experience of foreign institutional shareholders involving in corporate governance for reference, we suggest that the market introduces the institutional investor to make up the space of reduction of state-owned shares. And thus it can optimize equity structure and improve operating performance of the listed company. Sequentially, it will make the conversion into the investors leading governance pattern which residual income power and control power are syncretic come true.This paper first discussed the supervision effectiveness of institutional investor in corporate governance of Chinese listed companies, then analyzed the inherent reason, exertion manner of Chinese institutional investors participating in corporate governance. Then from the economical point, we use shares effect model, company numbers effect model and behavior game model to make further study on institutional shareholders activism behavior. After that, this paper examines the relativity of institutional shareholdings and the corporate performance through an empirical study on data of 2017 institutional holding listed companies from 2001～2003. The empirical study indicates that there is a positive and significant correlation between the proportion of institutional investor shareholdings and corporate governance performance. Moreover, combing with cases of institutional investor exerting shareholder activism in later five years, we carry out a further exemplification on the effectiveness of Chinese institutional shareholder participating in corporate governance. The cases of institutional investor exerting activism by'vote with hand'and'relationship investment'explain fully the effective of institutional shareholder activism in monitoring control shareholder and administrators infracting the interest of middle-small shareholders. The final section brings out corresponding countermeasures of institutional investor improving corporate governance performance.