An Study On The Inhibition Effect Of Institutional Ownership On Unfair Related Party Transactions

Because of the imperfect market system and inadequate corporate governance structure of Chinese listed companies, the large shareholders frequently take advantages of unfair related party transactions to manipulate profits of the listed companies or grab the interests from the listed companies. The result directly damage the interests of minority shareholders, even distort financial information, and mislead investors judgment, so hinder the healthy development of capital market. Therefore, seeking a new way to inhibit large shareholder more effectively becomes the urgent matter.With the development of institutional investors, more and more institutional investors participate in corporate governance to strengthen the supervision of unfair related party transaction and inhibit large shareholder expropriation. But the inhibition effect is limited by supervisory cost. To explore the equity counterweight and external supervision of institutional investors,to regulate the related provisions of institutional investors to participate in the governance of listed companies, to protect samall investors’ legal rights,then promote the healthy development of securities market.Firstly, this article analyzes the characterstics of unfair related party transaction and institutional investors of manufacturing a-share listed companies Secondly, from2006-2011shanghai and shenzhen A-share samples, we research on the overall institutional investors and different types of institutional investors influence on the asking for type unfair related transaction and paying type unfair related transaction. Meanwhile we also have study on the inhibition effect of institutional investors share-holding period features. This paper draws conclusions as follows:(1)the higher overall institutional ownership, the lower asking for type unfair related transaction, but the higher Information promote paying type unfair related transaction,that is the more stake the institution holding,the larger interest is conveyed to the manufacturing listed companies by paying type unfair related transaction.(2) Institutional heterogeneity can make different effect on the inhibition of the unfair related party transaction. According to the inhibition effect for unfair related party transactions of all institutional investors, QFII is the most significant,the second is securities investment fund and the social security fund, the worst is insurance companies, trust companies and general legal person organization.(3)Both the original Institutional investors of holding stock for more than one year and the new institutional investors can inhibit the asking for type unfair related party transaction,but the first is more significantly.