Research On The Preference Factors Of Institutional Shareholders Governance Actively And Economic Consequences

Under the background of China’s economic boom, the institutional investors’ development is overwhelming in nearly10years. According to the statistics, by the end of2012, the market value of the shares held by institutional investors has accounted for17.4%of the current A-share market; the number of holdings of institutional investors has reached a considerable scale. As the external governance, institutional shareholders have a significant impact on corporate governance. Especially institutional shareholders can mitigate the two types of agency problems, namely: one is the agency conflict between the shareholders and the management, the other is the conflicts between big shareholders and small shareholders. Moreover, institutional holdings can increase shareholders’wealth and the value of listed companies. Because of the positive influence of institutional investors, the occurrence of harming the interests of small shareholders is being reduced. Institutional investors’ active actions make us fully realize that the institutional shareholder is affecting the healthy development of listed companies and their force is increasingly important. In the background of rapid growth of institutional investors, regulators support the development of institutional investors, to promote the development of sound corporate governance structure and the stability of the stock market, Therefore, studying the positive behavior of the institutional investors is very meaningful.The existing literatures focus on institutional investors’ investment group, simply considering whether they are positive investor or not. However, due to the diversity of institutional investors, there is a big difference among different institutional investors’investment. For example, the insurance fund and invested company have great relevance in the interests of businesses. It is difficult to guarantee the independence of the investments. For the purpose of earning a commission, Securities Company will become passive investors. The size of closed-end fund’s holdings is relatively small, there is not enough power to stimulate them participating in corporate governance. For open-end funds, who are under pressure of the payment of funds at any time, the possibility to participate in corporate governance is very low. Social Security Fund is shouldering the responsibility of increasing the value of assets and alleviating funding gap. Therefore, the behavior of their investments is focusing on long-term holdings and asset appreciation, using the investment approach of "vote with their hands" rather than the traditional "vote with their feet". The investment experience of Social Security Fund in the A-share market has proved to us" long-term is the gold". In addition, the biggest difference between the Social Security Fund and other institutional investors is that there is no business relationship between the Social Security Fund and invested company. There is little possibility of conspiring to the social security fund and management. These factors make the Social Security Fund actively participate in corporate governance, to improve corporate governance, enhance corporate value and increase shareholders’wealth. Through a lot of empirical data and empirical methods, we studied the Social Security Fund investment performance from2003to2012, focusing on analysis of characteristics of the Social Security Fund holdings company and the methods of the Social Security Fund governs company, empirical analyzing the relationship of Social Security Fund with the company’s performance.This article first introduced institutional investors into the topic, and then studied the Social Security Fund. Based on the principal-agent theory, stakeholder theory and cost-benefit theory, analyzed the motivations of the Social Security Fund to participate in corporate governance. Analyzing of the relationship between the Social Security Fund and shareholder activism in subsequent, illustrating the Social Security Fund is the shareholder activists and listing the ways of the Social Security Fund to participate in corporate governance. First of all, the study of the characteristics of the Social Security Fund holding company, finding that the Social Security Fund prefers to hold high cash dividend payout ratio and a low degree of ownership concentration company. High rate of cash payments can guarantee the security of the investment, what’s more, the concentration of the ownership is low, which is beneficial to the social security fund to participate in corporate governance. Second, we studied how the Social Security Fund to participate in corporate governance, finding that the Social Security Fund can monitor the CEO and increase the probability of CEO involuntary changes. Through the supervising of big shareholders, the Social Security Fund can reduce the cash occupation of the big shareholders. Social Security Fund is responsible for the supervision mechanism and check-and-balance partially. Finally, on the effects of the Social Security Fund actively participating in corporate governance has carried on the empirical analysis. Once companies announce the information of the Social Security Fund ownership, the cumulative abnormal return of the companies will rise in the short term and the Social Security Fund ownership is positively related to the company’s operating performance.Based on the above analysis, the main research contents are as follows:Chapter Ⅰ presents introduction. This chapter mainly elaborates the research background, research significance and the frame structure. Illustrating the shortcomings and the innovation of the article. It is in preparation for the article further expansion.In the background section, it illustrates the inevitable trend of institutional investors participating in corporate governance. The theoretical significance and practical significance to illustrate the importance of studying institutional investors govern actively. In addition, the chapter explains the innovation and deficiency.Chapter Ⅱ literature reviews. This chapter introduces the meaning of shareholder activism in detail. Sort out the literature reviews on the influencing factors of institutional investors holding, positive governance routes and the governance effect, focusing on the effect of institutional investor actively govern.Chapter Ⅲ theoretical basis and institutional background. This chapter combines the principal-agent theory, stakeholder theory and cost-benefit theory discussed in this paper, providing theoretical support for the paper. Describe the development, the present situation, characteristics and functions of the Social Security Fun in detail, and discuss the relationship between the Social Security Fund and positive governance and the investment way of the Social Security Fund.Chapter Ⅳ research design. This chapter presents the research hypothesis, variables selection, data source and the construction of a research model.Chapter Ⅴ the empirical analysis. This chapter is divided into three parts. Firstly, analyzing the factors of affecting Social Security Fund’s governance. Secondly, testing the impact on governance corporate governance structure, finally, testing the economic consequences of Social Security Fund governance actively.Chapter VI conclusions and recommendations. According to the text of discourse and empirical analysis to draw conclusions and make recommendations.The main conclusions of this study are as follows:(1) Social Security Fund holdings preferences.The level of cash dividends is positively correlated with the Social Security Fund, and it is an important factor affecting factor for Social Security Fund holdings. Ownership concentration is negatively related to selecting preferences of the Social Security Fund, ownership concentration is lower, the more possibility of the Social Security Fund to participate in corporate governance. With the weakening advantages and higher concentration of ownership of state-owned company, it is no longer an important goal of Social Security Fund holdings.(2) The role of Social Security Fund on corporate governance. On the one hand, the Social Security Fund is a supervisory role. Empirical findings relationship between involuntary change and the Social Security Fund is positively correlated, indicating that the Social Security Fund can help improve the possibility of CEO unwilling change, On the other hand, the Social Security Fund can supervise big shareholder. We studied the level of occupation of funds and the relationship with the Social Security Fund, and found that the higher the Social Security Fund ownership, the Social Security Fund can protect the interests of small investors.(3) The Social Security Fund’s active governance can produce positive economic consequences. By calculating the cumulative excess return, finds that when discloses the information of Social Security Fund ownership publicly, the cumulative excess return of the Social Security Fund holding company is positive, the market has significant feedback to the information of Social Security Fund ownership. Secondly, there is a positive correlation between the performance and the Social Security Fund.In this paper, the innovation points are as follows:(1) In terms of the object of study, due to institutional investors have differences; there is a big difference in the investment of institutional investors. From the existing literatures, it is difficult to find the effect of different institutional investors. The Social Security Fund is more and more important under the current economic background, therefore, this article takes the Social Security Fund as the research object.(2) On the research content, there are a few of studies the holding preference of institutional investors. This article mainly from the level of cash dividend payment, the ownership concentration as well as the nature of the company to study the characteristics of how the Social Security Fund to chose; From management and big shareholders to analyze the function mechanism of Social Security Fund; From short-term and long-term to study the economic effect of the Social Security Fund active governance.(3) On the research perspective, this paper from the active perspective to study the Social Security Fund. At present, the evaluation of institutional investors is not consistent. But Social Security Fund has a special mission to guarantee safety and appreciation of assets. Therefore, we have reasons to believe that the Social Security Fund is an active institutional investor.Because of the limitation of the personal knowledge ability and related conditions, shortage of this paper as follows:(1) About the study methods.The main ways of Social Security Fund to participate in corporate governance actively include exercising their voting rights, putting forward to the board bill, shareholder litigation, etc. Because there is no mandatory requirement to disclosure the information, we cannot obtain the relevant data. This article can only be studied by means of ownership, and not apply the most effective way to actively study the Social Security Fund active governance role.(2) Timeliness of relevant data. Due to the information of Social Security Fund holdings only is informed in the regular reports, therefore, only by quarterly disclosure of information study the short-term effects of the Social Security Fund holdings, delaying the information of disclosuring the Social Security Fund holdings.