The Effects Of Heterogeneous Institutional Investors On The Innovation Capability Of Chinese Commercial Banks

With the process of interest rate reform, commercial banks are facing increasingly fierce competition in the market. Internet finance is gradually competing with commercial banks for profits. The traditional business models which take interest margins as main source fall behind. In order to ensure sustainable development, commercial banks must promote their innovation capability to enhance their competitiveness. Some existing studies have shown that institutional investors have more superiority on finance, talent advantage, profession and other aspects than other investors. They play an important role in the performance of commercial banks. So, whether institutional investors have promoted the innovation capability of banks? Whether different types of institutional investors have different effect on the innovation capability of banks? Further researches are needed about these questions. As the researches in this area are poor, this paper will conducted a thorough study about these questions. This study will have a theoretical and practical significance on the innovation capability of commercial banks and the promotion of institutional investors.Under the guidance of some fundamental theories, this paper analyzes the path that investors influence the innovation capability of commercial banks. According to the different characteristics of institutional investors’ holding period, performance evaluation, investment style aspects, we divide the institutional investors into long-term institutional investors and short-term institutional investors. Long-term institutional investors have smaller performance pressure, steady investment style. They focus on long-term value of the banks. So they will pay attention to innovation capability of commercial banks. Short-term institutional investors have unstable funding sources, great performance pressure and aggressive investment style. So they focus on short-term profit. Thus they don’t pay attention to long-term factors such as innovation capability.After proposed theoretical assumptions, we use the data of 16 commercial banks from 2008-2013 to analyze the correlations between long-term institutional investors, short-term institutional investors, integral institutional investors and the innovation capability of commercial banks. The results show that there is a significant positive correlation between the long-term institutional investors’ shareholdings and the innovation capability of commercial banks. Long-term investors have a steady investment style and focus on long-term value. So they play an active role in the innovation capability of commercial banks. The shareholdings of the short-term institutional investors and the innovation capability of the commercial banks are significantly negative related. Short-term institutional investors are short-sighted and they pursue short-term maximization of benefits. These behaviors are not beneficial to improve banks’ innovation capability. There is a significant negative correlation between overall institutional investors shareholdings and commercial banks’ innovation capability. The institutional investors are short-sighted as a whole. They are not helpful to improve the innovation capability of commercial banks.Finally, according to the conclusions of this study, the paper gives some advice to how to promote the innovation capability of commercial banks and how to develop institution investors...