Value Discovery Function On The Target Companies By Pension Funds As Institutional Investors

With economic developing, population aging is becoming increasingly serious. In the end of 2014, the total number of population of China reached 1367.82 million, including 137.55 million over 65 years old, accounting for 10.1%, which means that the elderly dependency ratio reached 13.7%. China is expected to enter the senior-aging society in 2025, and enter the super-aging society in 2035.At the same time, the basic pension insurance funds revenue has been growing significantly lower than the basic pension insurance funds expenditure. The pension gap problem should be solved urgently. Population aging and pension gap bring enormous pressures for Chinese fiscal.Pension funds investing into capital market in this context are being gotten attention by theorists and practitioners. The pension funds operating in capital market by constructing a reasonable portfolio can achieve a higher rate of return in the long time. The size of the capital market continues to expand with the development of the pension funds together. Both get benefit from pension funds participating in capital market.So this article will focus on the selection of suitable target companies for pension funds in order to increase the value of pension funds. Then I will mainly do the research of value discovery on the target companies by pension funds as institutional investors in this paper.Pension funds as institutional investors mean pension funds as an independent body participating or commissioning professional organizations to engage securities investment activities. When pension funds engage investment activities, pension funds can recognize the value of the companies, and find the potential value. This is that pension funds as institutional investors discover the value of the target companies.Based on the theoretical analysis of the pension funds as institutional investors and value discovery function and the empirical research in the social security reserve fund, this essay discusses the relationship between pension funds investment behavior in the value discovery process and the related indicators of the target companies, states the important role of the value discovery function of the target companies for increasing the value of pension funds.Then the main contents of this paper include:Chapter One, analyze the current situation of aging population, note that pension funds need value-added, and clearly put forward that pension funds as institutional investors participating in the capital market is important for value-added. Then confirm value discovery on the target companies by pension funds as institutional investors is the main point of this article.Chapter Two, define the concept of pension funds as institutional investors, clarify the institutional investors characteristics. Comprehensively understand the current situation of the social security reserve fund and the corporate pension funds participating in capital market.Chapter Three, through the introduction of the relationship between price and value, further clarify the value discovery function. Based on pension funds investment philosophy, analyze motivation of value discovery function, study the effect of value discovery function to the target companies.Chapter Four, due to the current social security reserve fund on the market is more mature, and data collection is more convenient, it is more effective to conduct empirical research using the social security reserve fund as an example.The last depart, based on the theoretical and empirical research, come to a conclusion and make recommendations for pension funds, the listed companies and market regulatory.In this paper, research of the value discovery on the target companies by pension funds as institutional investors has the following meanings:Theoretical significance:(1) In this paper, treat the social security reserve fund holding or not, holding amount as investment behavior, the target companies' governance environment and the performance of the companies as study elements of the social security reserve fund. According to the more comprehensively research, provide more reliable support for the theory. (2) Based on the larger span time period empirical process, covering the throughout the period of social security reserve fund into the capital market, compared to the short-term empirical study, the conclusion may be a little different, but more accurate. (3) Pension funds as institutional investors participate in the target companies' corporate governance, owning unique advantages. This article provides theory and empirical evidences for the pension funds participating in the capital market.Implications for practice:(1) The pension funds as important capital market institutional investors should play an important role. In other countries, the pension funds are relatively mature. There is significant correlation between the pension funds and capital market. The empirical study confirmed the social security reserve fund actively involved in the capital market performance. (2) Regarding as the theoretical and empirical researches, you can find the rules of the social security reserve fund to select target companies, providing reference for future pension funds stock selection, and an evidence for reform of listed companies.The innovation mainly shows in following aspects:First, This paper argues that pension funds as institutional investors in the target companies have value discovery function. Pension funds as institutional investors make the choices of the target companies according to the value discovery results:the companies' actual return higher than expected return means the companies are undervalued. The higher degree the companies undervalued, the more likely pension funds hold their stocks.Second, When the pension funds hold the target companies, adjustment the proportion of pension funds holding will have a positive impact:The pension funds increasing the proportion in the target companies can help to improve the right to participate corporate governance of the pension funds as institutional investors, then help to optimize the corporate governance environment, and promote the improvement of company performance.Third, in terms of policy recommendations, based on the dimension of pension funds as value investors, pension funds as institutional investors should make full use of value discovery function to hold cautiously, to participate in corporate governance actively, to insist on value investment, long-term investment and responsibility investment, and to increase investment proportion in the emerging industry appropriately. The companies based on the pension funds investment should optimize corporate governance structure and improve the quality of themselves, in order to create long-term profits and get long-term development.Finally, Selection of the variable:In the variable selection process, set two indexes as the social security reserve fund as institutional investors investment behavior as an innovative way:whether hold share and how many to hold. And note that in the process of the empirical study, the social security reserve fund holding shares is a prerequisite of studying the social security reserve fund adjusting shares. Around the two indicators, analyze their influence factors and influence results so that the social security reserve fund as institutional investors study can be complete.However, since lack of theoretical knowledge, analysis may be not clear, model specification may be not accurate, and collecting large sample data is not easy, which will become obstacles and shortages of this article.