A Study On Institutional Investors And Enterprise Investment Constraints

Institutional investors have been the nucleus of the securities business in every country. We can see a clear trend from the development process of capital market in western developed countries, that is, the proportion of Individual investors has been declining; On the contrary, the proportion of Institutional investors has been increasing. With their economies of scale and long-term, rational investment, Institutional investors push the innovation of the capital market and consummate the economical function of security market finally. In Chinese transitional economies, institutional investors have expanded greatly with the development of capital market and desired to participate in corporate governance. But there are negative effects in the development process of institutional investors in the mean time, which make people have some questions to the role of institutional investors and the reasonableness of specific policies developing institutional investors. In view of this situation, the papers attempts to provide an evidence of institutional investors play active role in the corporate governance from the perspective of Enterprise Investment, in order to provide an evidence to support the related decision-making which actively develops institutional investors.While MM theory is questioned on practical problems, the papers points out that the true sense of the perfect capital markets does not exist in the real world, information asymmetry and agency problem make the investment behavior of enterprises in large part by financing constraints impact. So the author identified a research idea that financing constraints act as an important decision variable of an interpreter of Enterprise Investment. Then, while information asymmetry is introduced to the study of capital market by foreign scholars, the author focused on the degree of information asymmetry and agency costs in the exploration of Enterprise financing constraints. Furthermore, a large number of studies have shown that the development of institutional investors is an important means of solving information asymmetry and agency problems. We need empirical research to prove whether Institutional investors in Chinese capital market can play a role in reducing information asymmetry, thus reducing the Enterprise financing constraints and improving the Enterprise Investment. In the end, the author placed institutional investors on the end-result.We tried to combine normative research and empirical research, first, we use the transmission mechanism, which institutional investors participate in corporate governance, reduce information asymmetry, reduce agency costs and thus ease the financing constraints and improve the enterprise investment, to the basis and prerequisite for empirical research. Then, we use empirical research on the normative conclusion of the study to test. Mainly referring to the FHP research methods, we divided the sample enterprises into two groups by institutions to hold or do not hold, then grouped the sample enterprises by level of institutions participation, compared different Investment-Cash Flow Sensitivity to make a conclusion. Finally back to normative research and put forward the "how to" suggestions.Based on the above research ideas, the papers is divided into six chapters, each chapter of the main elements are as follows:Chapter one is introduction. This part firstly makes a brief explanation of background, and then points out that Institutional investors lead market that is the general trend of development of securities markets and is also the key to maturity to the Chinese capital market. This part also points out the significance of this research and innovation. Finally, this part makes a detailed analysis on research methodology and basic framework for the papers.Chapter two outlines for institutional investors. This part mainly states three contents, the definition of institutional investors, the holding characteristics of institutional investors and the function of institutional investors in stock market. As for the definition of institutional investors, the part introduces different definitions from abroad and from local, and then according to research of demand, the author carried on the definition in this thesis, that is the organizations which use their own funds or trust funds for securities and investment activities, specifically including securities companies, trust investment companies, pension funds, insurance funds, bank funds, and other Fund. In addition, the papers analyzes the holding characteristics of institutional investors, that is institutional investors prefer to hold the company's stock which is large-scale, higher-price, higher-turnover, listed a long time, to be recognized outside and have a better performance of the previous year. Finally, we list the functions of institutional investors in the securities business. We also points out that although there have some controversy on the active role of institutional investors in the academic community, we can not simply deny the development of institutional investors. For the functions of institutional investors to securities business, we should have a long-term vision and a relatively optimism.The third chapter reviews the development of institutional background of Chinese institutional investors, focusing on the characteristics of Chinese institutional investors in the development process. At the same time, the development of institutional investors in China also benefited from the law has been gradually perfected, and a sound law provides a system to protect the institutional investors. Finally it clear that institutional investors have become a major force in Chinese securities business.Chapter four includes the theoretical foundation and literature review. Theoretical analysis mainly explains a logic chain, which is Enterprise Investment--Financing Constraints--Institutional Investors, in order to lay a theoretical foundation for empirical research. Literature is reviewed from the holdings of institutional investors and enterprise investment two areas. Among them, a review of institutional investors is also from the influence on the volatility of earnings and corporate governance two parts. Finally, we do a simple induction on the characteristics of research literature of institutional investors, that sample selection has experienced from cross-sectional research to time series research, study methods has experienced from a single-variable test to the multiple linear regression analysis, and research content has experienced from the company's characteristic information to the study of corporate governance information.Chapter five is empirical research. Mainly referring to the FHP research methods, we divided the sample enterprises into two groups by institutions to hold or do not hold, then grouped the sample enterprises by level of institutions participation, compared different Investment-Cash Flow Sensitivity to make a conclusion. Through descriptive analysis, correlation analysis and regression analysis, we concludes that:a listed company which Institutional investors to move into, the level of financing constraints is lower, and financing constraints degree of magnitude as the increase in the proportion of institutional investors holding adversely affected.Chapter six includes the conclusions and recommendations. Based on the previous normative research and empirical research, we summarize main research findings. We can see from the empirical results, the level of institutional investors' participation on the market increased quickly and wide-ranging, institutional investors has become an important force in Chinese securities business. Moreover, the higher the level of participation of institutional investors, financing constraints faced by enterprises is smaller, thus helping enterprises to invest in efficiency. In addition, the papers pointes out some deficiencies in research data, method and other aspects, and hope those Scholars could continue to study the effect of institutional investors on corporate governance in future studies. We can study the institutional investors'behavior of continuous change by perspective of time series, detail the types of institutional investors, and discuss the impact of institutional investors on corporate governance from the view of property rights. Finally, we propose to make "super-normal development of institutional investors" as an important measure to vigorously develop the capital market. We must strive to foster institutional investors, expanding the ranks of institutional investors, and strive to improve and optimize the main structure of investors. At the same time, institutional investors greatly improve the efficiency of the allocation of resources and effectively promote economic growth and social wealth increase.Innovation and significance of the papers is that, although those scholars at home and abroad had many studies on enterprise investment and institutional investors, but rarely set up relationship with the two aspects. Domestic studies focus more on these perspectives, which are Institutional investors'impact on Corporate Governance structure, the relationship between the Institutional investors and corporate performance, and the relationship between institutional investors and earnings management. There is no literature to explore institutional investors from the field of corporate finance. Previous studies have shown that the participation of institutional investors helps to reduce the asymmetric information and agency costs faced by company. In the field of corporate finance, resolution of information asymmetries will directly affect the financing constraints faced by the company and thus reflect in its investment efficiency. The papers attempts to provide an evidence of institutional investors play active role in the corporate governance from the perspective of Enterprise Investment, in order to provide an evidence to support the related decision-making which actively develops institutional investors.