Reseach On Security Investment Fund’s Intervention In Corporate Governance Of Chian’s Listed Firms

It has been14years since the first fund company was set up.Security funds only held1.81percent of all publicly traded stock sharesin China by the year of1998, however it rose to7.7percent by the year of2011. Now security mutual fund is one of the most important institutionalinvestors in China, which has professional restraints on corporategovernance. Based on the data of2009-2011, this paper exams thecorporate governance effect of Securities Investment Funds who areamong the top ten shareholders and hold the stock for four seasons in ayear. Our findings are as follows:The study shows that securities investment funds have promotedcorporate governance significantly using agency cost as the substitutevariable of corporate governance level. By adopting the newest SocialNetwork Analysis (SNA) approach, we find there is a negative relationbetween the point centrality, which is a network index to describe howimportant the listed company is among all the listed companies investedby the securities funds, and the agency cost. Therefore, it is concluded that the networks formed by the investment of the Securities InvestmentFunds have positive effect on corporate governance in those investedlisted companies.The empirical results show that higher the lagged proportion ofsecurity funds held, the higher value of a corporation would reach whenTobin’ Q is selected as the substitute variable of corporate value. TheR-squared of the model is improved by adding network index, and thepoint centrality is significantly positively related to corporate value.The effect of security mutual fund on corporate performance isproved. It turns out that funds can significantly improve corporateperformance when taking core ROA as dependent variable. Thesimultaneous equations models are constructed for endogenouselimination. Three stag least squares method has been adopted to solvethe models and get the same results as expected, which proves therobustness and reliability of the one-equation multiple regression models.The paper finds that security funds will select corporations based on theirperformance.