Research On Institution Shareholding Impact On Medium And Small Investors Protection

China's capital market has been developed for more than 20 years. The legal system is improved, but the protection for medium and small investors'interests is still insufficient. There are big issues of corporate integrity and irregularities. The actions of false reports have often occurred. The phenomenon that big shareholders and managers encroach on medium and small investors is common in listed companies in our country. Relative to disadvantaged medium and small investors, institutional investors have stronger force to contend with big shareholders and managers and to participate in the corporate governance. At the beginning of the 21 century, with the implement of the reform of non-tradable shares, China vigorously advocates to develop institutional investors, which makes the stockholding of institutional investors increase year by year and increases the possibility to participate in the corporate governance for institutional investors. As institutional investors in China have gradually developed in recent years, the researches that institutional investors have positive impact on the protection of medium and small investors are less. In this context, the paper aims to research on the influence of the institutional investors on the protection of medium and small investors to find an effective way to protect medium and small investors' interests from the ownership point of view.First, this paper reviewed literatures about investor protection and the method of investor protection measurement from three levels of laws and government, the market and the companies. And this paper organized the literatures about the influence of the institutional investors on the protection of medium and small investors. Second, the paper clarifies that the theoretical basis is information asymmetric theory and agency theory and an analyzed the ways to realize the interests of medium and small investors. On this basis, the paper discussed the mechanism about how the institutional investors affected the protection of medium and small investors. Third, the paper constructs the index of the interests'protection of medium and small investors from the companies level and calculated the index with data of 700 listed companies from Shenzhen Stock Exchange. The index was used in the empirical test as the dependent variable. At last, the paper examined institutional stockholdings influence on the transparency of information disclosure, return on investment, governance structure, corporate value, corporate integrity and medium and small investors'index. The result showed that institutional stockholdings had a positive influence on the corporate transparency of information disclosure, return on investment, corporate governance structure, corporate value and medium and small investors' index, but did not have an obvious effect on corporate integrity. In order to verify the reliability of conclusions, according to the results between institutional shareholdings and the index, the paper took an endogenous test. The result also proved that under the control of endogenous problems with instrumental variable method and simultaneous equation model, the conclusion is still valid.The main contribution of this paper:First, the paper reviewed fully literatures about investor protection, especially the method of investor protection measurement. Second, on the basis the existing literature, the paper constructed the index of medium and small investors' protection from the companies' level. Third, the paper confirmed that institution shareholding had a positive effect on the protection of medium and small investors with using regression analysis. And in order to ensure the reliability of the empirical results, the paper took an endogenous test after regression analysis between institutional stockholdings and medium and small investors'index.