The Influence Of Institutional Investors’ Ownership Balance On Corporate Value

Since1950s, the rapid development of institutional investors has been an outstandingcharacteristic of the developed market and new rising market. The institutional investorsdeveloped very late in China, but in the advocate of the government, they grow very fast.For the past ten years, the institutional investors have been an important part in the capitalmarket. With the development of institutional investors, its influence on corporategovernance is concerned by theorists and practitioners. The institutional investors areplaying in an active role in the listed corporate, help to relieve the contradiction betweenshareholders and managers, relieve the contradiction between the biggest shareholder andthe other shareholders, and improve corporate value and corporate performance. In thebackground that the separation reform has been finished in2006, our paper uses thecorporate value to estimate the impact of institutional investors on corporate governanceand study the relationship between institutional investors and corporate value. Thisresearch has important theoretical and practical significance.On the basis of expounding the concept of institutional investors, the paper exploresthe development of institutional investors in our country and analyses the motivation ofinstitutional investors actively participating in corporate governance. After reviewingpapers about institutional investors, combining the system background of our country, ourpaper puts forward three hypotheses, selects Tobin’s q as dependent variable, theproportion institutional investors holding as independent variable, and some controlledvariable like size, age, industry to construct the model. Our paper uses empiricalmethodology to study all listed companies publishing A stocks in2006and2007. Withthe statistical software of SPSS12.0and Eviews3.1, we make the regression to themodels.Empirical study found that:(1) in the listed companies in China, the more sharesinstitutional investors own, the more corporate value;(2) the balance between institutionalinvestors and controlling shareholder is important. The better the balance, the bettercorporate value;(3) we classify the sample three types: dispersed equity, balanced equityand concentrated equity. The result of classification shows that though the separatereform have already finished, the structure of equity in most listed companies is stillconcentrated. In these three types, the regression results are different. In the companieswith balanced equity and concentrated equity, the relationship of the balance between institutional investors and controlling shareholder and corporate value is positive, and theresult is significant in statistics. In the companies with dispersed equity, the balancebetween institutional investors and controlling shareholder has not significantly positiveinfluence on corporate value.The empirical results show the institutional investors can improve corporate value. Toexerting the function of institutional investors in balanced the biggest shareholder andimproving corporate value, the paper proposes some policy suggestions. These suggestionscontain:(1) eliminate the system barriers which hinder the institutional investor playing arole in corporate governance;(2) improve the ownership structure and establishcompetitive ownership structure;(3) supervise the institutional investors.