Unique Strategy And Institutional Holdings

In the market environment with fierce competition, whether companies can maintain and continue to build a competitive advantage, depends on whether a company can develop and follow its unique strategic development according to its own characteristics, so as to adapt to the ever-changing economic environment, to cope with the impact of technological changes. In the waveof economicglobalization, China’s entrepreneurs have come to realize the significance of unique strategy for future competitiveness. Originally mainly depending on the price advantage to compete, Chinese companies are now trying to enter the upstream of value chain through innovation, to establish a set of business processes which is self-contained and difficult to replicate,to shape the unique corporate core competencies.As the scale and influence of institutional investors in the global security markethas been rising, whether institutional investors can enhance the effectiveness of the capital market has become a research focus of domestic and foreign scholars. Due to the fact that institutional investors have an advantage in the size of funds, information channels, research capabilities, they are considered to have a higher valuation andstock picking ability. The relationship between unique business strategy and institutional investors’ ownership preference reflectsnot only institutional investors’ ability to identify unique strategy and their preference for unique strategy, but also suggests whether institutional investors are playing the role of the effective allocator of funds on the securities market.This paper examines the relationship between the unique corporate business strategy and the institutional investors’ ownership preference in China’s capital market. We aim to further dissect and investigate stock selection preference and investment styleof institutional investors. Based on the sample of all A shares in Shanghai and Shenzhen markets from2002to2012, controllingthe effects of variables that affect company profitability, market capitalization size, level of development, the level of risk, we do linear regression analysis to test the relationship betweenthe institutional ownership of listed companies andtheir strategic uniqueness. Strategic uniqueness is defined asthe extent to which the level of corporate performance is not explained b market and industry factors, but only depends on the firm-specific facotrs. The study find that:(1) Negative relationship exists between the overall stake of the Chinese institutional investors in listed companies and corporate strategic uniqueness.(2) Unique corporate strategy has positive effect on the ownership of fund, insurance, social security funds, trusts, QFII in a company. The relationships of institutional ownership proportion and corporate strategy differ by institution type.(3) The five specialized financial institutions of funds, security companies,insurance companies, social security funds and QFII as a whole, shows positive preference for firms with unique strategy, while the other institutions show aversion to unique strategy.