A Research On The Impact Of Institutional Investors’ Continued Duration Of Stock Ownership On Corporate Governance In China

The influence of institutional investors on corporate governance has long been the hot issues of domestic and foreign scholars.There are two motivations of institutional investors:investment or speculation.On the one hand,in order to share regulatory gains,with the advantanges of the information,professional and the capatial,institutional investors have the power and ability to participate in corporate governance to reduce agency costs,and improve the firm performance of its holding company.On the other hand,institutional investors themselves also have agency problems.For their own interests,institutional investors may support the executive’s plan,and even conspire with the executives,leading to the damage of the firm value.At present,the research on the impact of institutional investors on corporate governance in China mainly focuses on the the proportion of institutional ownership..However,it is not comprehensive to research the role of institutional investors only from the proportion of institutional ownership.Institutional investors participate in corporate governance and improve the performance of the company on the premise that the company has continued ownership of the stock.Once institutional investors’shareholding behavior is interrupted,institutional investors can not participate in corporate governance.Therefore,whether institutional investors can actively participate in corporate governance is not only related to the proportion of institutional investors holding shares,but also with the period of institutional investors holding shares.It is of great theoretical and practical significance to study the influence of institutional investors on corporate governance from the new perspective of institutional investors’ continued stock holding duration.Firstly,based on the holding duration measure on the impact of institutional ownership is found,the duration of the level of Corporate Governance:after non tradable share reform,institutional ownership is positively related to sustained period and the level of corporate governance,the holding duration is longer,more can improve the level of corporate governance;in addition,according to the shareholding proportion the level of grouping empirical evidence shows that the higher proportion of institutional investors holding,the duration is longer,more can improve the level of corporate governance.Then,this paper used the company’s proxy for capital expenditure,equity financing and cash dividend respectively as the company’s investment decision and financing decision and dividend policy,empirical research on institutional investors continued to impact on corporate decision making.The results show that the duration of institutional ownership is positively related to capital expenditure,equity financing and cash dividend,and the longer the institutional investors holding shares,the more they can participate in corporate decision-making.The longer the duration of institutional investors holding shares,the more actively play the role of supervision and governance,improve the level of capital expenditure,expand the scale of equity financing,promote the issuance of cash dividends,and protect the interests of minority shareholders.Finally,this paper studies the influence of institutional investors’ duration of ownership on firm performance.We found that:after the reform,institutional investors holding duration is positively related to business performance;long-term institutional investors can improve the company’s performance,while the short-term institutional investors cannot.The proportion of institutional ownership is higher,its holding duration is longer,to improve the company’s performance is more obvious;the shareholding ratio is low,the holding duration are negatively correlated with company performance;different types of institutional investors have differences in improving the performance of the company after the reform:the fund and QFII can improve the performance of the company,brokers,trust and insurance can not improve the performance of the company.The contribution and innovation of this paper are mainly embodied in:First,the innovation of research perspective.Study on the influence of institutional investors on corporate governance literature,mostly focus on the proportion of institutional investors from the perspective of institutional investors have good value choice ability,enhance the performance of the company may be the company performance is good.After the institutional investors hold their shares,it takes time to participate in corporate governance and improve the performance of the company.The necessary time for holding shares is the basic guarantee for institutional investors to improve the company’s performance.In this paper,we put forward the concept of institutional investors continued ownership duration with the help of Bohren et al(2005),Elyasiani(2010),Jia and Lee and Chung(2012),Derrien(2013)and Garel(2016).We construct a measure of institutional investors continued ownership duration index.This paper provides new evidence for institutional investors’ role in corporate governance from the perspective of the duration of institutional investors’ continued ownership.Second,the innovation of research ideas.The research of this paper extends the research scope of institutional investors’ participation in corporate governance.There have been literatures about the impact of institutional investors on corporate governance,mainly from the level of corporate governance or corporate performance.This paper studies on the influence of institutional investors on corporate governance in addition to the influence of institutional investors on corporate governance and corporate performance,but also on the effect of institutional investors on corporate policy.Third,according to the duration of institutional investors holding shares,the sample is divided into two categories:institutional investors,long-term and short-term holdings,which enriches the existing research results of short and long-term institutional investors.In the past there are two categories on the basis of literature on long-term institutional investors:first,according to institutional investor turnover characteristics of institutional investors will be divided into short-term and long-term investors,this classification methods ignore the institutional investors in a stock is in a long-term behavior of stocks are likely to exhibit short-term behavior.Second,according to the quarterly number of institutional investors,the number of quarterly holdings is large(small)in the 2 quarter of the agency is defined as long(short)line institutional investors.This approach does not measure the duration of institutional investors’ holdings.According to the duration of institutional investors holding shares,the sample is divided into long and short term holdings by institutional investors,which enriches the research results in this field.Fourth,the innovation of research conclusions.From the three aspects of corporate governance,corporate policy and company performance,this paper studies the influence of duration of Shareholding on corporate governance,and gets some new results.This paper finds that:(1)after the split share structure reform,the duration of institutional investors’ shareholding is positively related to corporate governance and corporate performance.The conclusions of this study provide a new policy basis for the split share structure reform.(2)from the three aspects of corporate investment,equity financing and dividends to shareholders,the empirical study of institutional ownership continued to affect the period of corporate policies that institutional ownership duration is long,the higher the level of corporate investment,equity financing is higher,the better the dividend.(3)the institutional investors will be divided into five categories,the study found that the stock holding period,respectively measure:China’s open-end fund holdings and QFII duration is longer,more conducive to enhance the performance of the Holding Company,there is no significant correlation between trust and brokerage,insurance company’s holding period and the Holding Company performance.It is of great significance to study the continued ownership duration.The research conclusios in this paper will be helpful for institutional investors to have a permanent investment idea and will be helpful for the healthy development of China’s capital market.In China’s capital market,it is necessary to establish a set of incentive mechanism to encourage institutional investors to long-term holdings.The institutional investors should play an impormant role in improving the firm performance.Only the fund and QFII can really improve the fim performance,and the security dealers,trust companies and insurance companies cannot really improve the firm performance.It is necessary to guide the the security dealers,trust companies and insurance companies to establish long-term shareholding concept and incentive mechanism for them.