Empirical Study On Influence Of Chinese Institutional Investors On Firm Value

Since the regulatory authority proposed the "extraordinary development of institutional investors" slogan, over the past decade, the institutional investors maintained a momentum of development and growth. With the expansion of the institutional investors’ capital size and the continuous improvement of domestic financial market, the impact the institutional investors had on the corporate governance and firm value of listed company has been amplified.The paper is made of the theory and empirical research that we conducted on the influence of institutional investors on firm value. Through the establishment of simultaneous equations models, we found that there exists positive correlation between the institutional investors’ shareholdings and the corporate governance level and firm value. We also adopted the two-stage-least-squares method to further study the relation between the institutional shareholdings and the firm value, the empirical results support the viewpoint that the institutional investors have played a significant role in promoting firm value, and there exists both "vote by hands" and "vote by feet".The study also selected the holding period as another perspective. We divided the institutional investor group into long-term institutional investors and short-term institutional investors, and the empirical results indicates that, compared with the short-term one, the long-term institutional shareholdings shows stronger positive correlation with the firm value.At the end of the paper, we concluded that the domestic institutional investors are still at a preliminary period of development, and as a result of the low degree of participation in the corporate governance, the influence that the institutional investors have on the firm value is limited. It is recommended to develop domestic institutional investors comprehensively and coordinately, besides, to encourage domestic institutional investors to take joint actions.