The Impact Of Institutional Ownership On Corporate Investment Efficiency

Investment is an important condition for the growth and development of modern companies.The increase in corporate value depends fundamentally on the firm's investment behavior and investment efficiency.Thus investment efficiency has been a hot topic in theory and practice.In reality,the investment efficiency of listed companies in China is not satisfactory as a whole.Various frictions(especially information asymmetry and agency problems)make companies tend to deviate from optimal investment levels.Underinvestment and overinvestment problems exist simultaneously in the companies.It has seriously affected the value promotion and sustainable development of companies,and it also interferes with the normal operation of the securities market to a certain extent at the same time.Since the Chinese stock market has opened to institutional investors in 2000,institutional investors have become an important investment in China's capital market after ten years of development.As the third party between large shareholders and small shareholders,institutional investors have the advantages of profession,information,capital,so they have ability to monitor corporates' behaviors.They are an important external governance mechanism.The investment behavior of institutional investors and their supervision of listed companies have become an important content of the current study.Therefore,it is of great significance to study the impact of institutional investors on investment efficiency.It can not only explore the ways to improve the efficiency of corporate investment,but also enrich the research on governance effect of institutional investors.In this paper,we use ordinary OLS model to examine the effect of institutional investors' holding scale,holding independence and holding period on the investment efficiency.And we also adopt GMM and 3SLS methods to control the possible endogeneity of the stock holding and investment efficiency.its channel mechanisms to investment efficiency in corporation.further We discuss the potential channel mechanisms of the impact of institutional investors on the investment efficiency further.We have found these conclusions:The research shows that institutional ownership generally increases the corporate investment efficiency.By considering the independence of institutional ownership,we find that only pressure-resistant institutional ownership increases corporate investment efficiency,which alleviates both over-investment and under-investment.By further considering the influence of the holding period of pressure-resistant investors,the higher persistence institutional ownership has,the higher investment efficiency company has.Meanwhile,it shows the higher shareholding proportion the pressure-resistant institutional ownership accounts for,the higher persistence it has.There is a significant positive influence between pressure-resistant investors and firm's investment efficiency,and there is no reverse causality or two-way causality.Further studies conclusively show that easing external financing constraints,reducing agency costs and increasing executive incentives are several important mechanisms for promoting investment efficiency.This study provides a useful perspective for scientifically making development strategies for institutional investors and enhancing investment efficiency.