Research On Influence Path Of Institutional Investors To The Performance Of Private Listed Companies

In recent years, institutional investors have become new-rising forces in global capital market. They help to improve various issues of corporate governance, protect interests of investors and to stabilize the market. Both the scale and quality of institutional investors have improved greatly since CSRC proposed the idea of "extraordinary development of institutional investors" in2001. As a result, institutional investors are playing an increasingly important role in listed companies. Private enterprises are key components of national economy due to its importance for China’s industrial structure adjustment and economic restructuring. However, private enterprises need institutional investors’help to improve corporate governance problems more than other companies, because their business compliance is poor. Therefore, this essay takes China’s securities market as the background, and makes research on the effect of institutional investors to enterprise performance, which has great significance to promote private economy by further development of institutional investors.As for the effect of institutional investors on corporate governance and enterprise performance, there are different ideas in academia. Some scholars believe that institutional investors can enhance corporate value and protect the interests of investors through active participation in corporate governance. Some scholars believe institutional investors tend to "vote with their feet" and the short-term trading practices could stimulate short-term investment behaviors of companies. Some other scholars even believe that institutional investors may be in collusion with the operators of listed companies in order to damage shareholders’ interests. The reasons for scholars’ different perspectives may be due to different market backgrounds and different development stages of institutional investors. Therefore, this essay uses evidences of private listed companies from2008to2012to validate the impact of institutional investors to private listed corporate performance.It is not clear that most literatures which support institutional investors can improve business performance thorough improved corporate governance, results from "value choice" or "value creation". Therefore, this essay analyzes how institutional investors make effect on the performance of private listed companies from the agency cost perspective. This paper argues that higher shareholdings of institutional investors results in the increasing cost of "vote with their feet", so that institutional investors switch over to use "voting by hand", supervise the self-interested behaviors of both managers and large shareholders, reducing agency costs and increasing business performance. In this influence path, agency costs are mediating variables. Hypotheses of this article are verified through empirical test, the higher the proportion of institutional investors, the lower agency costs of private listed companies, and the greater enterprises performance. The results of this paper are useful supplements to literatures on institutional investors and corporate governance, and provide important lessons for future research.