The Research On The Relationship Between Institutional Investors And Corporate Fraud

With the development of securities market in China, the number of listed companies has increased steadily, and the total market capitalization has also increased with an unusual speed. However, the frauds of listed companies appearing repeatedly during the process of securities marke t rapid development, which not only makes the majority of investors suffer heavy losses, but also seriously hinders the healthy development of the securities market, and it also constantly beats the fragile nerves of relevant regulatory authorities, so tha t the frauds of listed companies have become the focus of all walks of life. In recent years, as an important component of external governance of companies, the institutional investors have gradually become an important force in the capital market, and whe ther their rapid development can effectively restrain the frauds of listed companies. At the same time, whether the type of institutional might affect the role of it in supervising listed companies. Those problems are all difficult to find a unified answer in the past research, so there are all worthy to further study.Therefore the study focuses on the impact of institutional investors on the frauds of listed companies. Based on the relevant theories of principal-agent, information asymmetry and corporate governance, this paper takes the A-share listed companies and their matching companies which were publicly criticized, denounced or punished by the Ministry of Finance, Shanghai and Shenzhen stock exchanges and the China Securities Regulatory Commission in the last three years(from 2011 to 2013) as the object of study. And it evaluates by using Probit and part of observable Bivariate Probit, empirically verifying the impact of institutional investors on the frauds of listed companies. Then it conducts a classification study according to whether there are other commercial relationships between the institutional investors and investee companies apart from the relationship of investment, so as to test the impacts of different types of institutional investors on the frauds of listed companies. The study result shows that: institutional investors can not only directly affect the frauds of listed companies, but also through the check-and-balance of large shareholders to impact on the frauds of listed companies. Specifically on the whole, the institutional investors could restrain the frauds of listed companies; Judging from classification, pressure-resisting institutional investors can play an effective oversight role to restrain the frauds of listed companies, but pressure-sensitive institutional investors will promote the occurrence of the frauds. The study in this paper is beneficial to guide the development of institutional investors which has certain significance for restraining the frauds of listed companies a nd promoting the healthy development of capital market.