Governance Of Institutional Investors And Listed Companies In China

As our security market marches into the all circulation period, imperfect corporate governance has become the obstacle preventing our market and corporations developing well in the long run. Since 1998, when we began to develop institutional investor, institutional investor has grown quickly and become more influential and powerful in the capital market. As the laws of security and fund be implemented, the capital market becomes more regulated, a more favorable environment is forming for institutional investors. Besides, the regulators adopt the policy to encourage institutional investors with the hope that they can play an active role in the company as share holders and improve the value of company. In academic world, scholars have done a lot of researches on the relations between institutional investor and corporate governance. But there is little research on the relation between institutional investor and capital structure and relevant empirical study.This paper first introduces the development of institutional investor in both China and abroad, point out the meaning of the research. Then it introduces the previous researches on the relation between capital structure and company value and the relations among institutional investor, company value and capital structure. Next, the article gives out two hypotheses and two equations about the relation between institutional investor and capital structure. The article uses two-stage least squares empirical regression with the data from 2006 to 2009 to reach the conclusion that capital structure and institutional investor equity share are positively correlated. It also use the conclusion to explain why it is positively correlated between institutional investor equity share and company value in China. At last, the paper gives some policy recommendations about the capital market and listed companies according to the research.