Analysis Of The Influence Of Institutional Investors' Shareholding On Corporate Performance

The institutional investors are positive force to impact corporate governance. Chinese institutional investors have begun to have an impact on corporate governance of listed companies, and has played a role of improving the situation of corporate governance of Chinese listed companies and the performance of corporate.In view of the fact that the fund investment has an important position in China's institutional investors, this paper owns stocks take the fund as representative, take Chinese to be listed as the sample,to study relation between institutional holders and company performance.This paper scrutinized the influnence of institutional investors'shareholding upon the listed corporate performace through descriptive statistics, independent sample mean comparison, regression analysis, stability testing and other methods, by using all the listed companies as sample that either they have fund shareholders or not, earnings per share EPS, net return on equity ROE, profit from principal operations CPM, Tobin's Q and market to book MBR as the dependent variable,the proportion of fund shareholding and power balance with fund shareholding as independent variable, asset-liability ratio, company scale and company's growth ability as control variables. Our sample encompasses a 4-year period from 2004 to 2007, covering a cycle from a bear market to bull market.The empirical results show that there is a significant positive correlation of corporate performance and the panel data of fund shareholding in Chinese listed campanies. It indicates that the fund shareholding is relevant to the efficiency of corporate governance as a whole. In addition the power balance with fund shareholding and corporate performance variables are also significantly correlated .It means that the larger the proportion of institutional holdings to the largest shareholders, the more actively that institutional investors participating in corporate governance, the better the performance of companies, and the more obvious institutional investors' positive role. Institutional investors are not only "the discoverer of value", but also "the creator of value", which consistent with the summary about the currently concept of institutional investors idea. The participation about Chinese institutional investors to corporate governance is moving in positive direction, but the power and capacity need to be further strengthened.There are two innovations in this paper. First, we use the latest sample date of 2004-2007, which are consisted of all the listed companies either they have fund shareholders or not, through independent sample mean comparison for analysis. Second, we revise and improve the original model, using a number of targets as corporate performance variables, and adding market to book ratio as an alternative variable which did not used in the previous studies, so that making a more comprehensive study.Because of the limitations of data availability, we only have empirical research on the funds as institutional investors in this paper, so the scope of the institutional investors is objectively narrowed. A large number of securities companies, trust companies, as well as private funds are excluded; it may have underestimated the level of our country institutional investors participating in corporate governance.