The Impact Of Institutional Investors On The Corporate Governance Efficiency Under The Social Network Perspective

The research scope of this article is corporate governance. Corporate governance is facingtwo major twist. Firstly, with the advent of the information age, the development of all entities cannot behind closed doors, corporation are no exception, corporate governance must considerexternal information. Secondly, the degree of involvement of institutional investors in corporategovernance is also deepening. With the combination of these two realities, this article willintroduce “inter-corporation one-mode network” which is led by institutional investors as acorporate governance factor. The formation of “inter-corporation one-mode network” is as follows:two corporations can form a social relationship by having the same institutional investors,resulting in the transmission of information and communication between them. After consideringall the relationship there will form a inter-corporate one-mode network led by institutionalinvestors. The research methods of this paper are social network analysis and empirical analysis.Firstly, through analyzing the characteristics and formation mechanism of the “inter-corporationone-mode network”,we find out that the behavior of institutional investors are becoming morerational, the width and breadth of its investment is deepening, the investment proportion ofinstitutional investors in the real economy also increases in the post-crisis era. Secondly, this paperwill quantify the transmission of information among enterprises and use quantitative indicators asexplanatory variables, investigating the impact of information transmission and inter-corporation social relationships on its corporate governance efficiency. Empirical results show that from2003to2012, the position of a corporation in the “inter-corporation one-mode network” has asignificantly positive impact on its corporate governance efficiency. Especially in recent years,this impact is gradually deepening. This Research paper explains the impact of institutionalinvestors on corporate governance from a more complete perspective, namely the perspective oftraditional corporate governance research and social network,thus further providing thetheoretical basis and empirical evidence of the governance role of institutional investors.