Research On The Impact Of Heterogeneous Institutional Investors’ Shareholding On Corporate Financing Cost

In September 2020,the State Council put forward three priorities for building the capital market,among which ‘improving the mechanism for institutional investors to participate in corporate governance’ was placed at an important position.However,considering the limitation of shareholding ratio,insufficient legal binding force and other realities,the influence of institutional investors as external shareholders on corporate governance may be limited;At the same time,academic research on the role of institutional investors in corporate governance is still controversial.Nowadays,among the key tasks of supply side reform,cost reduction plays an important role.For enterprise,financing cost is an important standard when choosing financing methods and making investment decisions.Financing cost is the key factor to resource allocation in the capital market.The data of A-share companies from 2011 to 2021 are used for empirical analysis.Firstly,analyze the relationship between shareholding ratio of institutional investors and companies’ financing cost,including cost of equity capital,cost of debt capital and weighted average cost of capital.Secondly,according to institutional investors’ relationship with listed companies,further distinguish them into two categories:independent and gray,and examine the different impact of them on corporate financing costs.Thirdly,considering the mechanism of heterogeneous institutional investors affect the financing cost of enterprises,this paper further discusses the impact of two corporate governance factors,namely,the nature of property rights and the transparency of accounting information,on the relationship between heterogeneous institutional investors’ shareholding ratio and companies’ financing cost.This paper finds that:(1)the higher the overall shareholding ratio of institutional investors,the lower the financing costs of enterprises,including cost of equity capital,cost of debt capital and weighted average cost of capital;(2)The higher the shareholding ratio of independent institutional investors such as funds,social security and QFII,the lower the financing cost of enterprises,these types of institutional investors can effectively reduce enterprise financing costs;However,the shareholding of gray,such as securities,trust,insurance and enterprise annuity,has no significant impact on financing cost;(3)Compared with stateowned enterprises,in private enterprises,holding shares by independent can reduce more financing cost;(4)Compared with higher transparency of accounting information,among the enterprises with lower transparency,the shareholding of independent can reduce more financing cost,the improvement of transparency weakens the impact of independent institutional investors in reducing the financing cost of enterprises.Moreover,endogenous test and robustness test further verify the robustness of conclusion.The conclusion of this paper demonstrates that independent institutional investors such as mutual funds,social security funds,and QFII can play a role in regulating corporate governance and accounting information disclosure and reducing corporate financing costs,while gray institutional investors cannot.This conclusion contributes to a better understanding of institutional investor behavior and provides reference for relevant regulatory authorities to improve the regulatory system accordingly.The main innovations of this paper are: first,previous studies did not study equity and debt costs of capital in the same framework,and the measurement of corporate financing costs was not comprehensive.This paper considers the effects of heterogeneous institutional investors on equity and debt costs of capital,as well as their weighted average cost of capital;Secondly,by analyzing the effects of property rights and accounting information transparency on the impact of heterogeneous institutional investors on corporate financing costs,this paper explores the possible channels through which institutional investors affect corporate financing costs in terms of corporate governance,information interpretation,and dissemination,thus enriching the existing research in this field.