Institutional Investors' Shareholding,Ownership Nature And Corporate Fraud

“2015 China Listed Company Legal Risk Index Report” issued on November 15,2015 pointed out that the number of corporate fraud in China listed companies in 2014 rose 204% year-on-year.Corporate fraud does not only harm the image of the corporate itself,but also disturb the market order,hinder the healthy development of capital market,even damage the interests of the investors.It is a key focus of the capital market and a great challenge of market regulators.Based on such background and considering current development of institutional investors and special ownership nature in China listed companies,this paper aims to research the relationship between institutional investors' shareholding,ownership nature and corporate fraud.Through consulting related literature at home and abroad,this paper finds out that research on institutional investors' shareholding and corporate governance starts earlier and has gained rich achievements.About whether institutional investors have an incentive and a positive impact on corporate governance,two relative conclusions "active ownership theory" and "negative ownership theory" were drawn.With the collection of domestic empirical data,"active ownership theory" received more confirmation and verification.Institutional investors are willing and able to exert positive influence on corporate governance,especially when shareholdings are higher.Research on institutional investor' shareholding and corporate fraud which starts late and still belongs to the frontier fields is mainly based on research on institutional investor' shareholding and corporate governance,thus has certain research value.About the relationship of institutional investor' shareholding and ownership nature,existing literature research the governance effect of state-owned nature and institutional investor'shareholding from the perspective of earnings management and corporate fraud is still a new perspective.Therefore,beginning from institutional investor' shareholding and corporate fraud and combined with ownership nature,this paper makes a research on the separate influence of institutional investor' shareholding and ownership nature on corporate fraud,and further on the influence of ownership nature on the relationship between institutional investor' shareholding and corporate fraud.The research conforms to the times and theoretical demands,having certain innovation and practical value.Based on the principal-agent theory,institutional shareholder activism hypothesis,the government intervention theory and the analysis of related research,this paper builds theoretical framework of institutional investor' shareholding,ownership nature and corporate fraud to put forward three hypotheses.Then,based on two multiple linear regression models,using the data of a-share listed companies from 2011 to 2015 to do empirical test and result analysis.The conclusions of this paper are: there is a significant negative correlation between institutional investors' shareholding and corporate fraud.The higher the institutional investors' shareholding is,the larger the possibility of corporate fraud is;compared with state-owned listed companies,non-state-owned listed companies are more likely to fraud;in non-state-owned listed companies,the negative correlation relationship between institutional investors' shareholding and corporate fraud is significant while in state-owned listed companies is not.Thus,this paper argues that improving institutional investors' shareholding will help to suppress corporate fraud especially in non-state-owned listed companies.The innovation of this paper is providing a new perspective of the research on institutional investors' shareholding and corporate fraud.This paper considers ownership nature factor,does a complete theoretical analysis of institutional investors' shareholding,ownership nature and corporate fraud,and designs the interaction term of institutional investors' shareholding and ownership nature to mainly test the influence of ownership nature on the relationship of institutional investors' shareholding and corporate fraud,finally using the latest sample data to draw new research conclusions.It can further enrich the theoretical achievements of institutional investors' shareholding and corporate fraud.The conclusion of this paper affirms the function of institutional investors on corporate fraud and has following practical value: provide methodology for listed companies to control their corporate fraud orientation,strengthen the compliance business philosophy and achieve long-term development goals;provide the basis for policy making to encourage and guide institutional investors as a corporate fraud supervisor and ensure their function and position.