Research On Institutional Investors And Corporate Governance Of Chinese Listed Companies

In the process of development of capital market in western countries, the size of institutional investors is expanding constantly. Their behavior involving in corporate governance has become even more frequent and in-depth. Chinese institutional investors appeared late. But they develop rapidly in the recent years. Their role in improving corporate governance is strengthening constantly. Ma weihua, the governor of China Merchants Bank, pointed out that institutional investors play a very active role in improving the level of corporate governance in a speak of "The role of institutional investors in corporate governance" on June,2007. Since there will be more and more institutional investors entering our capital market, how to make best use of institutional investors so as to improve corporate governance is a topic with forward-looking and practical significance. This paper analyses the domestic and foreign research results of the relationship between institutional invertors and corporate governance. U.S. institutional investors, represented for foreign institutional investors, have provided us with many useful lessons about the motivation and means of involving in the governance of listed companies. Also, it provides a new perspective for the establishment of perfect governance mechanisms of listed companies in China. This paper analyses the development status and behavior characteristic of institutional investors in China so as to find out the right type which will be more likely to participate in corporate governance. Meanwhile, we check up whether the existing institutional investors in the company are good for enhancing corporate governance efficiency by positive test. From the result, we can see that the holdings of institutional investors positively associate with the performance of listed companies. However, the test for information disclosure and dividend policy does not reach such an effect. To further the research, we also analyze the factors affecting institutional investors' behavior of participation in corporate governance. Finally, this paper recommends that we should develop insurance, social security, closed-end funds and QFII as the primary institutional investors selectively.