A Study On The Effect Of Institutional Investors’ Shareholding Upon Dividend Policy Of Listed Companies

With the rapid development of Chinese capital market, its structure is also tremendouslychanging. Institutional investors gradually become the most important part in Chinese capitalmarket, and Chinese capital market has gradually entered the era of institutional investors.Foreign studies have shown that the development and expansion of institutional investorsmake the capital market stably and healthily develop, improve the governance and enhancethe performance of the listed companies. Therefore, the systematic study about theeffectiveness of institutional investors on the governance of listed companies, willincreasingly become the focus of practitioners and theorists.As the important external governance body of a listed company, the fast development ofinstitutional investors has provided a new way for the sound and effective implementation oflisted company governance mechanism. Therefore, researching how the different types ofinstitutional investors influence on corporate dividend policy, has important significance intheory and practice to perfect the corporate governance structure and improve the listedcompanies’ dividend policy.According to the theory of "free cash flow","agency costs" and "transfer of benefits",this paper researches the motivation and effectiveness that the institutional investorsparticipate in the governance of listed companies from the view of the cash dividend policy.Selecting for Chinese A-shares listed on the non-financial company data from the year of2008to2010, this paper builds the Logit model and multiple regression model to make astatistical regression analysis. This paper finds that with the shareholding ratio’s increasing ofChinese institutional investors, the probability and level of the cash dividend given by thelisted companies will increase. However, in the "dominance" and "abnormal cash dividends"listed companies, institutional investors are difficult to play their proper positive shareholders’doctrine. But, with the continuous development of institutional investors, they began to showthe dissatisfaction on the large shareholders’ expropriation of minority shareholders’ interests.In order to gain a better understanding that the impact of institutional investors on thedividend policy of listed companies, this paper divides institutional investors into active institutional investors and passive institutional investors, according to the relationship thatexists between institutional investors and listed companies, holding period and the stake oflisted companies. Further regression analysis about the dividend policy and the different typesof institutional investors,this paper finds that active institutional investors in influencing theprobability and level of listed companies’ cash dividends have greater effectiveness than thepassive institutional investors; but in the "dominance" and "abnormal cash dividends" listedcompanies, active institutional investors do not play more effective supervisory role thanpassive institutional investors. But with the continuous development of institutional investors,they begin to exert positive influence on that large shareholders expropriate minorityshareholders’ interests.