The Research On Influence Of Foreign Institutional Investors On Firm Innovation

From the perspective of foreign institutional investors,this paper constructs the theoretical basis for the effects of foreign institutional investors on the corporate governance.By improving the corporate governance,it can alleviate the self-interest,self-protection and short-sighted decision-making of management to enhace the firm innovation.The main conclusions of this paper are as follows: First,foreign institutional investors have enhanced the firm innovation.Our empirical test found that the proportion of foreign institutional investors holding the company's outstanding shares is positively related to the firm innovation,and is significant.Foreign institutions has indeed improved corporate governance,thereby reducing the self-protection of corporate management.The self-interested behavior makes the interests of the management of the firm and the long-term interests of the firm become consistent,which makes the innovation behavior of the firm improved.Second,institutional investors' volatility of corporate stocks is negatively correlated with the firm innovation and is statistically significant.The low volatility of institutional investors holding indicates that foreign institutional investors hold stable corporate shares.It is a kind of investment thinking that is bought and held.This type of institutional investor pays attention to the long-term development of the firms,obtains the value of the investment from the long-term development of the firm,and obtains the corresponding investment income.Therefore,they have the kinetic energy to actively participate in the corporate governance and stability of the external institutional investors to effectively supervise the management of the firm,improve the corporate governance level,and promote the firm innovation.Third,Whether the impact of state-owned enterprises on the firm innovation is not significant.State-owned enterprises and non-state-owned enterprises have not had difference on innovation behavior.Regardless of the nature of the business,innovation i s an important factor in its long-term development.However,when this paper is grouped into the test of the impact of foreign institutional investors holding corporate tradable shares on corporate innovation behavior,the result of the difference has emer ged.In the group of state-owned firms,the influence of foreign institutional investors holding corporate circulation shares on the innovation behavior of state-owned firms is not significant.This shows that in state-owned fims,due to the appointment and dismissal of senior executives,the influence of management on the supervision of external shareholders is not significantly prominent,and the incentives of state-owned firms management have more careers besides the general salary incentives.Incentives for promotion,foreign institutional investors are obviously unable to influence the corporate governance of state-owned firms and thus have less impact on the state-owned firm innovation.Based on the above conclusions,this paper proposes corresponding policy recommendations:Fist,the government should support and encourage foreign institutional investors to invest in China's capital market.Second,Foreign institutional investors should be supported and encouraged to improve the governance of Chinese firms.Third,the government should support and encourage foreign institutional investors focus on the long-term development of the company,share the long-term development dividend of the company,and safeguard the long-term interests of the company.Fourth,the government should improve the ownership structure of state-owned firms.Through these measures,we will further enhance the chinese firm innovation.