The Impact Of Heterogeneous Types Of Institutional Investors On Agency Cost

As the leading force of Chinese enterprises, listed companies have promoted thedevelopment of Chinese capital market and market economy, but the imperfections ofthe listed company’s internal control mechanisms and external oversight mechanismslead to two types of agency problems, the problem between shareholders andmanagers and the one between controlling shareholder and minority shareholders, theproblems restrict the development of listed companies and reduce the enterprise value.After2000, the fast development of institutional investor has been supported bygovernment policies, the proportion of institutional investors in the capital markets isgrowing, which improves the motivation of the institutional investor to take part incorporate governance. Many scholars, at home or abroad, study the institutionalinvestor as a whole, ignoring that the heterogeneity of institutional investors haveinfluence on agency costs, so researching on the project has actual meanings.On the basis of the literature review and theoretical analysis, The paper selectsthe data of A-share listed companies from a three-year period ending in2011as theinitial samples, and then selects the companies whose share hold by securitiesinvestment funds, insurance funds or social security fund, analyzing the character ofdifferent institutional investor. At last, we use SPSS16.0to analyze the impact ofdifferent types of institutional investors in the company’s two types of agency costs.According to empirical test: Securities investment funds can effectively reducethe first class agency cost and the second class agency cost, its shareholding ratio hasa negative relation with the agency cost; because of the strategic alliance relation withthe managers and controlling shareholders, the shareholding ratio of insurance fundhas a positive relation with the agency cost; the shareholding ratio of Social SecurityFund has negative relation with the first class agency cost, but there is no obviousrelationship between the shareholding ratio and the second class agency cost, thereason is the shareholding ratio is too small to counter with the controlling shareholder.In short, there are heterogeneities among the different types of institutional investorsin motivation and ability, through continuous development of the institutional investors, inducting institutional investors take an active part in corporate governance,promoting the improvement of corporate governance structure, and realizing themaximization of shareholders’ benefits. Finally, the paper explores how to developinstitutional investors and place the company under the supervision of the institutionalinvestors, and put forward a series of recommendations.