Legal Research On China’s Institutional Investors Participating In Corporate Governance

Since the80s of20th century, institutional investors have played the leadingrole in corporate governance in mature securities markets such as Britain andAmerica. They are not only the backbone of the development of national securitiesmarkets but also an important factor in corporate governance optimization. In late60s of20th century, institutional investors in western countries represented by theU.S. had developed fast. For corporate governance, institutional investors haveexperienced the historical period from ’voting by foot’, negativism of shareholders,to ’voting by hand’, positivism of shareholders. With the gradual maturity of capitalmarkets, the rise and development of institutional investors are inevitable. Under thebackground of imperfect governance of listed companies in China, now it hasbecome an important research subject to strengthen and promote the development ofinstitutional investors, and meanwhile the issue has important policy implications. Indeveloping countries like China, due to the lack of a sound legal system to protectminority shareholders, the development of other corporate governance mechanismsincluding institutional investors would greatly facilitate the normalization andhealthy development of market. This paper attempts to analyze the need ofparticipation of institutional investors in corporate governance in China from thepoint of their current situation, and propose relevant measures from the legal point.The article consists of six parts, including:Part I defines the institutional investor and concludes the legal characteristics ofinstitutional investors to prepare for the following discussion.Part II analyzes the factors that affect corporate governance. This part firstintroduces the typical equity structure modes and the corporate governance structureformed on the basis of them. Then it introduces the equity structure mode of ourcountry and the problems of corporate governance. Part III By observing the development track and status of the institutionalshareholders in both the US and China, we can conclude that InstitutionalShareholder Activism is both practicable and important for China.Part IV focuses on the Chinese institutional investors involved in the corporategovernance. This article introduces the history of Chinese institutional investors andtheir practice, and then talks about the positive influence on corporate governance.Part V proposes the legal advice for the institutional investors taking part in thecorporate governance.Part VI introduces the questions that should be noted in the process ofshareholder’s rights protection.