Empirical Study On Influence Of Chinese Institutional Investors On Firm Value

In recent years, institutional investors have experienced an extraordinary development.According to the statistics from China Securities Regulatory Commission, theinstitutional shareholding proportion in total outstanding shares has reached70%in2010. As the proportion of shareholding of institutional investors keeps on growing,their impacts on market and companies are growing. Especially after the reform ofnon-tradable shares, institutional investors play a much more important role in thecapital market.Therefore, this paper made some theory and empirical research on the influence ofinstitutional investors on firm value, and the empirical result shows that institutionalshareholding and firm value are positively correlated; the result strongly supports theview that the institutional investors can enhance the company’s value. Based on theresult, this paper tested the cause of this relationship through the establishment ofsimultaneous equations models, empirical result shows that institutional investorsprefer firms with good performance and good corporate governance and theinstitutional investors has also played a role in promoting firm performance and value,that is,"vote by feet" and " vote by hands" both exist. Finally, this paper made someinvestigation on the contributions of different types of institutional investors oncorporate value, empirical result shows that securities investment funds, brokers andgeneral corporate ownership are significantly positive correlated with firm value, andthe relationship with other institutional investors are not significantly.This paper is structured as follows: First, introduction describes the background,significance, research methods and frameworks of this paper, and then a detailedreview of related issues of institutional investors, and finally established models.