Empirical Study On Performance Of Listed Companies Under The Mechanism Of Foreign Shareholdings

Since the 80s of last century, the Chinese economy has developed rapidly in the result of policies of reform and opening-up. From the micro level, one of the most important reasons is the establishment and perfection of a modern corporate system under the transition from a planned economy system to a market one, which improves the operating performance of our enterprises and provides power to the economic development. Having experienced nearly three decades of development, foreign investment has gradually penetrated into almost all areas of our economic life, and it becomes a noticeable phenomenon that they hold shares of our listed companies in the domestic capital market. Therefore, we can conclude that along with policies of reform and opening-up going deep into Chinese economy, all kinds of factor markets becoming gradually perfective and consumer market getting further expanding, more and more foreign capitals will flow to China to invest in shares in the future. the emergence of foreign shareholding listed companies will definitely has huge impact on the performance of Chinese listed companies. However, most of our listed companies are state-owned enterprises before they issue shares. They are still in the process of transition of economic system. So the function of a large part of corporate governance factorsTheoretically, the emergence of foreign shareholding listed companies will definitely has huge impact on the performance of Chinese listed companies. However, in view of unsound financial system, imperfect market economy system and underdeveloped modern corporate system in China, we can't simply tell what exact influence foreign shareholdings will bring to corporate performance and what different influences various foreign shareholdings will generate. Furthermore, neither by existing theories, nor by research results based on the modern corporations under the system of mature market economy, can we utterly deduce the real status in China. Indeed, even research under mature market economy system has not arrived at a universal conclusion. Under this circumstance, foreign shareholdings of listed companies in China have great meaning in economy.In this paper, we sort to answer the following questions by studying this important economic phenomenon. Which kinds of governance mechanisms will affect corporate performance?; How the relationship between them are? And whether the introduction of QFII can significantly improve corporate performance? We take all listed companies with foreign shareholdings as samples, and through theoretical analysis and empirical research, we achieve the following conclusions:Firstly, the proportion of foreign shareholdings and firm performance have negatively relationship, that is, low proportion of shares held by financial institutions is helpful to improve performance. Therefore, increasing the number of QFIIs and quota of QFII methodically and encouraging financial institutions such as joint venture companies, overseas asset management companies and overseas fund to invest in domestic listed companies are in favor of corporate performance.Secondly, the concentration of shareholdings is noticeable positively related to the corporate performance. It can increase the earnings premium relative to the monitoring costs, enhance the shareholders'power to oversight the board, and keep the pressure on management.Thirdly, in the governance mechanisms, the board size and proportion of independent directors is negatively related to company performance. That means there are so many board members that it's hard for them to negotiate and coordinate in decision-making, it also leads to the reduction of working efficiency. Since it's not long that independent director system is introduced into China, and many related laws and regulations are not perfect, the role of independent director system is limited. In addition, the separation of the positions has no clear relationship with corporate performance. In China, a majority of listed companies are restructured from state-owned enterprises, so the phenomenon of one-word is quite common. That is there exists separation of the positions apparently, but apparently but self-supervision and self-evaluation actually, leading the company's leadership structure does not have a positive impact on performance.Finally, the compensation of the management is significantly positive to corporate performance. So we can see that the companies with foreign shareholdings attach great importance to the design of incentive system of executive compensation. Through adjusting the payments, they can not only reflect but also motivate executives to work hard for their companies.The findings of this research reveal the cause and effect relationship between corporate governance structure of listed companies with foreign shareholdings and corporate performance, which plays an important role in understanding foreign shareholdings'impact on the opening-up of Chinese capital market and economic growth from the theoretical perspective. In addition, these results as reference are very important for listed companies to optimize their shareholding structure, to improve efficiency of corporate governance, and further to enhance corporate performance. Besides, to some extent they may inspire government with related policies of economic growth.