A Study Of Institutional Shareholding’s Influence On The Governance Efficiency Of Independent Directors

The institutional investors are known as the core of external governancemechanisms which can solve the second-class principal-agent problem, which have asignificant impact on the internal corporate governance efficiency. Since independentdirector system was introduced, the scholars have not got a unified conclusion on thegovernance efficiency of independent director. The institutional investors can improvethe independence of independent directors and urge the independent directors toperform their responsibilities actively, through equity restrictions and their ownadvantages. Then whether can it improve the governance efficiency of theindependent directors? The corporate performance is the "barometer" of governanceefficiency of independent directors. So this article studies the affect of institutionalinvestors on governance efficiency of the independent directors through comparativeanalysis of strength or weak correlation between independent directors and corporateperformance in two cases of equity restrictions high and low.By selecting China’s A-share listed companies during2008-2011as samples, thisarticle used the normative method and the empirical method combining with thecorporate governance theories to analyze the impact of institutional investors ’share-holding on the governance efficiency of the independent directors. In thetheoretical part, firstly, this article sorted out related researching results, defined theconcept of institutional investors and independent directors drawing on existingresearching results, and introduced the theoretical basis of the principal-agent andequity restriction; Secondly, this article analyzed the influencing mechanism ofinstitutional investors’ share-holding on governance efficiency of the independentdirectors. On the basis of mechanism analysis, this article put forward the hypothesiscombining; in the empirical part, this article conducted the regression analysis on thegovernance efficiency of independent directors, and the influence of institutionalinvestors’ share-holding on the governance efficiency of the independent directors.Finally, this article makes policy recommendations from institutional investorsand independent directors combining with the empirical results, including vigorouslydeveloping institutional investors, guiding institutional investors to activelyparticipate in corporate governance, improving the operational mechanism of theindependent directors, building the legal system of independent directors and so on.