Study On The Effect Adout Institutional Investor's Reciprocal Behavior To Managerial Entrenchment

In corporate governance,the principal-agent relationship between shareholders and managers has always been the focus of academic research.In the internal and external pressure of company,managers may choose managerial entrenchment behavior which benefits individual interests rather than the overall interests of the company,for maintaining the stability of their career and maximizing their own utility.How to effectively suppress the manager's managerial entrenchment behavior is an urgent problem.With the development of institutional investor groups in recent years,their market principal position keeps climbing.Institutional investors holding gradually becomes a kind of important corporate governance mechanism,and turned into the focus of academic discussion.Under the traditional rational “economic man”hypothesis,existing literature about the research on the influence of the governance role of institutional investors is divided.The three main ideas are “effective monitor”,“voting with their feet”,and “collusion”,respectively.In fact,the respective interest get of institutional investors and managers depends on not only their own economic behaviors,but the mutual interactions.They not only attach great importance to the distribution of material benefits,but also weigh the friendliness others for themselves.Therefore,based on reciprocity theory,it is of great practical significance to explain the governance effect of institutional investors on managerial entrenchment.Based on this,this paper is under the framework of managerial entrenchment theory,mainly uses the reciprocity theory to explore the incentive effect of institutional investors' reciprocal behavior on managers,and explains the “conspiracy” behavior that might be included in institutional investors' reciprocal behavior,through mathematical model analysis and empirical test.This paper provides theoretical guidance for companys to optimize manager incentive mechanism.The main research work is reflected in the following aspects.First,this paper reviewed the related research progress of reciprocity theory,managerial entrenchment theory and institutional investors' participation in corporate governance.On the basis of defining and analyzing the related main concepts,the theoretical model of the influence of institutional investors' reciprocal behavior on managerial entrenchment was established.Then,from the perspective of dialectical unification in Classical Economics and Behavioral Economics,this paper analyzed the essential reason for the incentive effect of institutional investors' reciprocal behavior,which was human innate self-interest motive.Meanwhile,this paper explored the intrinsic reason of the motivation of reciprocity by using the model of achievement motivation in psychology and summarized the way by which institutional investors participated in corporate governance.Second,according to the law of diminishing marginal utility,the utility function of institutional investor and company manager was defined.Under the condition of complete information,this paper analyzed the reciprocal game process between institutional investor and manager by DK dynamic sequential reciprocity model,and explained how reciprocal motivation changed behavioral strategy.Model analysis results showed that manager with a certain reciprocity sensitivity was the premise of institutional investor' reciprocity behaviors playing incentive effect.Namely,if the manager was driven by reciprocity motivation,the incentive effect of institutional investors' reciprocal behavior would work.But if the manager's own reciprocal sensitivity was low,the implementation of reciprocal behavior by institutional investor could not affect managers.Third,based on the type division of reciprocity by Sahlins who divided reciprocal behavior into generalized reciprocal behavior,negative reciprocal behavior,and balanced reciprocal behavior,this paper developed reciprocal scale and made a multiple regression model to investigate the relation between institutional investors' reciprocal behavior and inefficient investment of companies,as well as the regulatory role of institutional investors' shareholding ratio.The results showed that institutional investors in general reciprocity could inhibit the inefficient investment of companies.While the implementation of negative reciprocity by institutional investors would exacerbate the phenomenon of inefficiency investment of companies.And this effect in state-owned companies was stronger than that of non-state-owned companies.Fourth,this paper examined whether the reciprocal behavior of the institutional investors could promote more cash dividends in companies,and explored whether there was "collusion" in the reciprocal behavior of institutional investors.It had been discovered that the generalized reciprocal behavior of institutional investors could promote corporate cash dividend for rationalization.And institutional investors' negative reciprocal behavior would have a significant negative impact on corporate cash dividend distribution.Institutional investors' cooperative relationship with managers established through balanced reciprocal behavior would lead to "collusion" between the two sides.Specifically,there was a significant negative correlation between the balanced reciprocal behavior of institutional investors and cash dividend distribution in companie with abnormal low cash dividend issues,and the negative correlation was gradually weakened with the improvement of institutional investors' governance status.Finally,this paper summarized the research conclusions,analyzed the shortcomings of the research,and planed for future research.