Research On The Correlation Of Institutional Investors And Non-efficiency Of Investment

Investment behavior is not only an important basis of capital accumulation but also the main motives for corporate growth. Whether the investment has high efficiency will have a direct impact on the maximization of companies'value. However, It is common that listed companies in China have over-investment or inadequate investment, which both belong to non-efficiency of investment. It is an important and long-term issue in the academic and practical world that how to effectively control the efficiency of investments. With the development of securities markets, institutional investors hold a progressively higher proportion of stock share. They all have abandoned the past role of passive investors, and began to have a transition into activism. They have a participation in investment decision-making, putting pressure on the board of directors, improving the investment efficiency. "Institutional ownership", as an important managing mechanism, has become increasingly popular in academic at home and abroad.In this paper, we introduce the basic knowledge of institutional investors and non-efficiency of investment, and have a comparison of the theory debate, then have a research from the analysis of mechanism and model examination. As to the analysis of mechanism, we creatively have a study from motivation analysis,game analysis and mechanism analysis. As to the analysis of model examination,we creatively construct three Logic models: the model of testing non-efficiency of investment,the model of testing relevance between institutional investors and non-efficiency of investment,the model of testing sensitivity between institutional investors and free cash flow. After above research, we found that the proportion and quantity of institutional investors as shareholders are negatively correlated to non-efficiency of investment, and institutional investors do not significantly prefer free cash flow sensitivity of the efficiency of investment companies. Holdings of institutional investors can effectively control non-efficiency of investment in listed companies, improve investment efficiency, optimize investment decisions. This article gives a series of recommendations about how to develop institutional investors in China.