Empirical Analysis On The Relationship Between Institutional Investors Holdings And Capital Structure Of Listed Companies

With the development of China’s capital market in recent years, institutional investors in the secondary market gradually grown to become an important participant in the capital markets. Forming a system of institutional investors including securities investment funds, insurance companies, pension funds and the QFII. Compared to individual investors, institutional investors have a more professional level, funding and information superiority, which makes them have the ability and motivation to participate in corporate governance in the past, and are playing an increasingly important role. Therefore, the role of institutional investors in corporate governance, especially the relationship between institutional investors holdings and the capital structure has become a hot research. But because of the different scholars research methods, research perspective, study samples and variables selection, the results also failed to form a consensus view.This paper researches on the relationship between institutional investors holdings and capital structure as the basis, the Chinese listed companies as samples, combining the derived theoretical and empirical research, studies the dynamic endogenous relationship between institutional investors holdings and capital structure, and also research the influence of the Control divergence to the relationship.Firstly, this paper summarizes the capital structure theory and its importance to corporate governance, the theory of institutional investors holdings and Control divergence theory, which is the theoretical basis for further research.Secondly, this paper elaborates previous studies about the capital structure, institutional investors and theirs relationship, and explain the key and its lack of research.Finally, under the framework of endogenous dynamic, this article studies the relationship between institutional holdings and capital structure. To dynamic panel data of Chinese listed companies as samples, using 2SLS and system GMM model, this paper carried on the empirical research to the relationship between institutional ownership and capital structure. Studies have shown the endogenous dynamics within the relationship between the institutional holdings and capital structure, and the two are negatively correlated. This means considering endogenous and dynamic endogenous factors to this problem is very important, and previous studies in the default method of exogenous variables are not very reliable. Control divergence has a significant influence on the relationship, which shows that governance effect of institutional investors is significantly affected by controlling shareholders.