The Research On The Institutional Investors And The Real Estate Listed Firms' Performance In China

Institutional investors have become important player in today's financial markets. Their increasing importance in corporate governance is further observed from the growing volume of corporate equity they control. As the financial markets have not matured in China, the institutional investors, developing at top speed, can not influence all the companies in China. Many foreign scholars examined the institutional ownership and firm performance from different industries. And the research in and abroad shows that the institutional investors prefer to hold the equity of the real estate listed companies, compared to other industries. To my best knowledge, there is no demonstration dissertation about the relationship between institutional investors and firm performance in the real estate listed industry in China. That is the reason why I write this dissertation.Tobin'q has been widely used as the index of the corporate performance. Many scholars have improved the Tobin'q, according to the need of the research and the situation. Because the floating stock and no-floating stock both exist in China, the share price fluctuates violently, and combining with our research, we improve the Tobin'q as: Q=(total debt+the number of floating stock×average share price+the number of no- floating stock×0.25×average share price)/total asset. Accord to the improvement, we translate no-floating stock to floating stock. And we use the half year share price to replace the year end share price. All this let the Q near the definition of the Tobin'q.The ownership structure/firm performance relationship has always been a subject of debate. How to treat the ownership structure variable may be an important reason for the inconsistency of a lot of research. Recently, when examining the relationship between ownership structure and firm performance, many researchers have examined the endogeneity of ownership structure, especially in the endogeneity of institutional ownership. Considering all other firm-specific variables controlled,we form the simultaneous equations model, including institutional investors and the firm performance. Using 30 real estate listed companies'data between 2003 and 2006, we regress the model, using 2SLS and OLS. Our study shows that, given the endogeneity of institutional ownership in the real estate listed industry ,firm performance is significantly dependent upon the percentage of institutional ownership, and vice versa. And we find that the endogeneity of institutional ownership do exist in the real estate listed industry.