Research On The Influence Institutional Investors Share Proportion Exerting On Corporate Performance Through Corporate Governance

The capital markets in western developed capitalist countries have become impeccable with the rapid development of economy since the 1970s. Institutional investors had begun to participate actively in corporate governance at the time that its status became more and more important. The role of institutional investors in corporate governance is so important that they can have a big impact on corporate governance now. The method of institutional investors participating in corporate governance gradually became the rational way of "vote by hand" from the immature way of "vote with their feet". Institutional investors improve the efficiency of corporate governance by realizing the goals, such as improving the board of director structure and the management compensation mechanism, strengthening the supervision of company management, increasing the transparency of information and warning the vulnerability of companies, through a series of measures.The Chinese government has noticed the importance of institutional investors in the capital markets, and promoted the development of institutional investors vigorously. For example, in 2000, the China Securities Regulatory Commission put forward the "extraordinary development of institutional investors" which regards the institutional investors as to improve the key power of the capital market. This move is considered as an important measure to optimize the structure of capital market investors. Until December 31,2013, China’s institutional investors have hold total of 927.6 billion, accounting for 28.3% of the total a-share market share, under the encouragement of the government. But we still should recognize that development of institutional investors in China lags behind that of developed countries. Attention to institutional investors and further research is necessary. Therefore, this paper discusses the influence of institutional investor exerting on corporate governance and corporate performance, by theoretical analysis and empirical research. It is helpful for people to understand the role of institutional investors in corporate governance, and provides some suggestions for institutional investors participating in corporate governance.In this paper, there are five chapters. The main contents are:The first chapter, introduction. This chapter includes background and practical significance of topic selected,, definition of institutional investors, corporate governance, and corporate performance, thought of research, innovation and deficiency, etc. This chapter is the preparatory work.The second chapter, literature reviewing. First, this part sorts out the literatures about institutional investors holdings affecting the performance of the company. Views can be roughly divided into three categories. The increase of institutional investors holding ratio enhance the value of the company. The increase has no real effect on the value of the company. And the increase has a negative impact on the value of the company. The view that institutional investors are effective supervisor’s point is accepted by people gradually, with the improvement of research methods, and theory. Then, this part sorts out the literatures which study the relationship between corporate governance and corporate performance. The scholars think that the board independence, enthusiasm, executive compensation, and ownership concentration are correlated with corporate performance. When institutional investors participate in corporate governance, they will make efforts to improve these aspects of corporate governance structure.The third chapter, theoretical analysis of institutional investors how to affect the corporate governance and performance. First, this part introduces three important aspects of corporate governance, which are structure of director board, management incentive and ownership structure. They are the keys institutional investors participating in corporate governance. Then, this part lists the ways how institutional investors participate in corporate governance. The main content of this chapter is theoretical analysis of institutional investors how to affect the corporate governance and performance, and corporate governance how to affect the corporate performanceThe fourth chapter, empirical analysis. First, this part proposes hypothesis, determines the rules to filter sample data, and build the model. Then it analyzes the sample data through descriptive statistics. Then this part choose fixed effects model according to the result of Hausman test, and regress the data by the model.The fifth chapter, conclusions and suggestions. The conclusions are stated and explained here. According the conclusions, several suggestions are made.The innovation in this paper:this paper study the issue how institutional investors affect corporate governance and corporate performance by selecting three indexes which are the proportion of independent directors, executive compensation and ownership structure. Scholars haven’t combined these three indexes to study this issue.The deficiencies in this paper:First, this paper chooses model based on balanced panel. so there are too many limits in data chosen to get enough data.Second, different kinds of institutional investors are not same in affecting the corporate governance and corporate performance. This paper doesn’t discuss further for the limit of space.