The Institutional Investors Heterogeneity And Financing Constraints

In an imperfect market, most of listed companies are suffering from financing constraints. The information asymmetry and principal-agent problem are the main reason to cause financing constraints.According to the previous research, institutional investors could help to reduce financing constraints. Institutional investors can decrease information asymmetry and principal-agent problem. It’s a good idea to improve financing constraints problem,In this paper, we take the simple from the listed company in Shanghai and Shenzhen stock exchange, covering period from2010to2012. We use cash-cash flow sensitivity model to measure financing constraints, In order to study the different type of institutional investor’s impact on investee company, we classify all of the institutional investors into pressure-sensitive institutional investors and pressure-resistant institutional investors, according to whether there exist commercial relationship between investors and investees.We find that the higher of pressure-resistant investors holding, the lower of financing constraints while the pressure-sensitive investors have nothing to with financing constraints. Furthermore, we also find that institutional investors could decrease the financing constraints of private enterprise while have nothing to do with state-owned enterprise. In a conclusion, the heterogeneity of institutional investors has different impaction on the financing constraints of listed company in China.