| Over the past three decades, with the development of the capital market in the world, the structure of the capital market has undergone a great change. The scale of the institutional investors increased sharply. These investors have become the most important investment entities. Nowadays, institutional investors become much more professional and active in China. In addition, they have plenty strengths compared to other investors, like huge sizes of funds, professional investment analysts and ability to access to information through multiple channels. If they actively participate in corporate governance by taking good advantages of their strengths, the governance structure of listed companies can be more perfect.The main problem of the corporate governance recently is the separation of ownership and management. The separation may result in interest conflicts, since it leads to asymmetric information between parties. In the interests of their own, managers may damage owners’ benefits, which cause so-called agency problems. With overseeing managers’ behaviors, institutional investors urge the salary system to become reasonable and effective to relieve the agency problems. Lots of researchers abroad have a plenty studies on this subject. In China, due to the late development of institutional investors group, the research is relatively small. By studying method from abroad for reference, some Chinese researchers came out with conclusions which are different from oversea scholars’. This may happen because of the discrepancy in national conditions. From the perspective of heterogeneity, this article studies the relationship within the institutional investors and management compensation in listed companies in China, specific research content are as follows:Chapter1, instruction. This part mainly provides a brief overview, including the purpose and significance of this study, the interpretation of related concepts in the study, the main content of the study, research methods and major innovations.Chapter2, literature review at home and abroad.1) Categorization and summarization the mature studies abroad. Foreign scholars studied institutional investors’ influence on management compensation and performance-sensitive in several angles and had several meaningful research findings.2) Analysis and summarization of the studies at home. The researches at home fall behind the research abroad in-depth and thorough. By studying foreign methods for reference, some researchers draw conclusions in line with China’s national conditions.Chapter3, relative theoretical analysis about the influence of institutional investors on the listed company’s management compensation. This part consist of5aspects:1) Analysis of Principle-Agent Theory, and explanation of the relation between Principle-Agent Theory and institutional investors.2) Analysis towards the motivations for institutional investors to affect management compensation, both nature motivation and cost-effective motivation.3) Studies about how institutional investors impact on management compensation, and outlines of different effects to each approach.4) Analysis of heterogeneity of institutional investors. Firstly, elaborate two determinants of heterogeneities of institutional investors, external government intervention and internal management system of institutional investors. And then illustrate the heterogeneity of active and passive institutional investors.5) Analyze the effective of the heterogeneity of institutional investors on the influence of management compensation, based on the divisions of institutional investors.Chapter4, by studying foreign methods and combining China’s national conditions, author conducted empirical research to analyze the effective of the heterogeneity of institutional investors on the influence of management compensation, In this article, author divided institutional investors into two parts, active ones and passive ones. Those investors are from those companies which are listed in Shanghai and Shenzhen stock market during2005-2011and in which the proportion of institutional investors’ stocks are over1%. The analysis of regression on the relations of the management compensation with the overall institutional investor holds, active and passive institutional investors were run separately. The effects of institutional investors on management compensation consist of two main areas:impact on the levels and performance sensitivity of management compensation. In addition, due to the special circumstances, there is a big difference between state-owned enterprises and non-state-owned enterprises in China, Therefore, author conducted another regression analysis based on the differentiation.Chapter5, Summarization of the empirical test result, related countermeasures and future research directions are described. Empirical test found several conclusions:1) shareholding of overall institutional investors has a significant impact on the levels and performance sensitivity of management compensation.2) Active institutional investors hold share has a significant positive correlation with management compensation levels, and it can improve the performance sensitivity of management compensation. On the contrary, shareholding of passive institutional investors has no significant positive correlation with management compensation levels, and significant influence on the performance sensitivity of management compensation.3) In state-owned enterprises, no categories of institutional investors show significant correlations with performance sensitivity of management compensation. Nevertheless, in no-state-owned enterprises, the shareholding of overall and active institutional investors can improve the performance sensitivity of management compensation, but except the passive group.Based on the conclusions, author proposed several related countermeasures as follows:1) Government should actively promote the construction of legal system related to institutional investors.2) Expanding the scale of institutional investors, encouraging common development of different types of institutional investors.3) Developing a new concept of corporate governance, to make society know corporate governance should take into account the interests of all the stakeholders.4) Encouraging institutional investors to participate in corporate governance, and play their role to oversee of the executive.5) The scholars in China should consider special national conditions while studying the relation between shareholding of institutional investors and management compensation with a creative thinking.The contributions of this article are as follows:First of all, the scholars’ studies in China of the relation between shareholding of institutional investors and management compensation mainly focused on overall institutional investors. Few of them started from the perspective of heterogeneity of institutional investors. Even if they were aware of the heterogeneity, few of them considered the difference between stated-owned and no-state-owned enterprises. However, this article has covered more factors and treated stated-owned and no-state-owned enterprises differently, and drawn a relative comprehensive conclusion.Secondly, due to a limited general research time which is span of3years or so, the conclusions of the existing literature in China about the influence of shareholders on management compensation study are not necessarily stable. However, the result of this article is more persuadable because of a longer research period which includes the financial crises time.Limitations of this article are as follows:Firstly, in the research of this article, only monetary compensation which cannot reflect the overall compensation of management is included. The information of invisible welfare and consumption of management is unsearchable, which may cause some deviations of the conclusion.Secondly, in this article, institutional investors are qualitatively divided into active group and passive group. But, as known, institutional investors have other different characteristics. Sometimes, it’s not reasonable to superficially divide them into one group. The category method of institutional investor may affect the accuracy of the conclusion. |
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