Institutional Investors Holding The Protection Of Small Investors

As institutional investors in Chinese stock market is playing a more and more important role, institutional ownership on the impact of investor protection is an important way of understanding the economic consequences of the development of institutional investors and will provide a useful perspective for investors protection. Meanwhile,infringement of minority shareholders by internal controllers and controlling shareholders is widespread of China's listed companies. Institutional investors, as outsider investors.will greatly protect interests of small and medium sized investors if they can improve the governance of listed companies. Thus, the paper will examine whether institutional ownership will monitor the listed companies and improve their corporate governance.This paper studies the institutional ownership of listed companies to improve corporate governance, and accordingly plays a role of protecting small investors, which proved the popular "institutional activism" theories to be true since the 80s of the 20th century. We found that China's institutional investors have begun to participate in governance of listed companies and have improved corporate governance. However, due to limits of China's market environment, legal environment and immature institutional investors, China's institutional investors have not fully improved governance of listed companies, and this is specifically contained in that institutional ownership can not stop Existing large shareholders controlling company's "benefits channel" behavior.ln sum, the results of this paper are as follows:1. We selected the performance of listed companies (ROE, RPS, NAS) as indicators of the performance of listed companies and found that institutional ownership improve the company performance. This indicates that institutional ownership can promote the company performance, which is beneficial to the interests of small investors.2. We selected cash dividend (DIVD) of largest shareholder controlling company to examine whether institutional ownership will stop the "benefits channel" behavior, but found institutional investors did not play a significant role.Meanwhile, test showed that institutional ownership positively affects other listed companys' cash dividend behavior, while the company paying cash dividend is not the reasons for selecting the company by institutional investors.3.using panel data test whether institutional investors promotes the efficiency of independent directors (Board_lnd) monitoring company executives and found that the current period institutional ownership enhance the efficiency of independent directors and binding of management of the companies of the next period.Institutional ownership have significantly improved the efficiency of supervision and greatly promotes the protection for the rights of small investors.