Radicalness Of Institutional Investors,Management Power And Performance

As the backbone of the securities market,institutional investors have been the focus of scholars both at home and abroad.More and more institutional investors are actively exercising shareholder rights,and increasingly tend to play the role of"activist shareholders" to participate in corporate governance.Institutional investors were sophisticated with virtue of their own advantages of scale economy and information interpretation advantage,guiding the rational trading stock tends to intrinsic value and improving market efficiency.This is one of the aims that China vigorously promotes the development of institutional investors.However,institutional investors with different radicalness have different characteristics in the investment philosophy,trading styles,relationship with the investee company and the ability to collect and process information,active investors not all have the ability to play a positive role for the Target Corp,the different radicalness of institutional investors also have the different motivation in participating in the corporate governance of listed companies.Therefore,it is very important for studying institutional investors to distinguish the different radicalness institutional investors reasonably.From the perspective of corporate performance(financial performance and market performance),this paper examines the governance advantages of institutional investors in China and distinguishes the impact of different degree of radical institutional investment on firm performance.According to the literature review,the domestic research on institutional investors and corporate performance management based on more serious agency problems,and then examined whether institutional investors play a supervisory role,but there are few scholars study the influence of managerial power to the relationship between institutional investors and performance.This paper used research sample from 2010 to 2015 of Shanghai and Shenzhen two city A listed companies,the company performance as the explained variable,the radical institutional investors and sound institutional investors which represent different radicalness of institutional investors as explanatory variables,the synthesis of managerial power index which is composed of four indicators from managerial power as the adjustment variables to construct multiple linear regression model,descriptive statistical analysis,correlation analysis as well as multiple regression analysis,in order to study the radical type of institutional investors' shareholding and robust institutional investors' shareholding how to affect corporate performance,at the same time test the impact of managerial power on different radicalness institutional of investors and corporate performance.This paper proves,(1)the higher the overall shareholding ratio of robust institutional investors,the better the company's financial performance.That robust institutional investors focus on long-term investment value,accumulating some best practices,general basic standards and rich management experience from various of companies in the process of participation in corporate governance,thus it promote the corporate governance level and it is conductive to the long-term development of the company.(2)The higher the overall shareholding ratio of radical institutional investors,the better the company's market performance.This is mainly because the radical institutional investors focus on rising stock prices,against long-term value investment,taking radical behavior to stimulate the company's stock price rise,so that render the company's stock price boost,and improve market performance in the short term.(3)The managerial power weakens the positive influence of robust institutional investors on the financial performance of the company.The general manager is often hostile to institutional investors,so there also has formed internal barriers to the robust institutional investors,the greater the power of general manager,the greater the resistance,causing the managerial power also had a negative effect.(4)The managerial power weakens the positive impact of the radical institutional investors on the market performance of the company.Specifically,the greater the power of the general manager,the greater the influence on the corporate governance system,the intervention behavior of radical institutional investors is hindered,the managerial power to some extent inhibited the relationship between radical institutional investors and corporate market performance.The following suggestions are put forward based on the results:(1)Relevant legal system supposed to be improved,as for illegally behavior pushing the company into the short-sighted behavior for obtaining the short-term profit,it's necessary to increase their penalty;perfect the market supervision and classification guidance,thereby enhancing different radicalness institutional investors to promote the value of the company.(2)Screen different radicalness institutional investors,establish a perfect screening evaluation system within company,detail assessment survey,and introduce robust institutional investors who maintain long-term value investment to corporation,in order to setting up a long-term strategic cooperation partners.(3)Optimize the allocation of power in order to achieve a balance.As the radical institutional investors dominate,the company should strengthen the power of general manager,rendering the managerial goals consistent with enterprise goals by implementing equity incentive,avoiding the radical institutional investors to promote the company into short-sighted behavior through the general manager's power advantage.As the robust institutional investors dominate,the company should impair the power of general manager,avoiding the power manager hinder robust institutional investors to improve the long-term value and improve governance system.(4)Construct a good corporate culture,taking into account both the interests of managers and shareholders,in order to obtain better synergy effects in the process of reducing the internal performance risk and perfecting corporate governance.