The Empirical Research About The Relationship Between Institutional Investors And Listed Corporate Performance

Modern corporate system led to the separation of ownership and management, resulting in corporate governance in the principal-agent problems, domestic and foreign scholars around the "internal control" and "free rider" phenomenon, standing on different points of view to study these problems, and propose different measures, has achieved fruitful research results. However, La Porta pointed out that in most countries, large companies, the most important agency problem is not the conflict of shareholders and managers proved by Jensen and Meckling, but rather the conflicts of interest between the controlling shareholder and small shareholders. We call the second category of its principal-agent problem, which is a more serious agency problems, because the controlling shareholder can use the right control of the company to obtain private benefits, the consequence of it would result in a performance decrease. China’s Listed Companies structure is irrational, capital market development and regulatory mechanisms are not perfect, leading to serious problems of governance of listed companies, controlling shareholders occupying the interests of small shareholders have occurred.In recent years, under the guidance of the ultra-conventional development strategies, China’s institutional investors grow rapidly along with the reform and development of capital markets, promoting the stable development of capital markets and financial innovation, having a far-reaching impact on healthy development of the entire economy. Institutional investors, with its strong financial strength and professional investment team to conduct various types of securities investment activities, being an important force of corporate governance, This is to address the principal-agent problem provides a new idea and ways.We believe that learning the advanced experience of foreign countries, Strengthen the company’s external governance mechanisms improve the corporate governance structure, improve the corporate governance standards. Institutional investors actively involved in control of the competition, can effectively monitor the behavior of controlling shareholders to reduce the controlling shareholders control over the private benefits, they play a role helping protect the interests of small investors. However, institutional investors supervising the controlling shareholder have a cost, and only when the achieved gains greater than assume supervision of the supervision costs, institutional investors will have the will and motivation of oversight. Therefore, we listed the company’s operating capacity, the level of supervision, the private benefits of control and the level of law supervision to build a model to discuss the control of private benefits and corporate performance impact. By examining the supervisory role of institutional investors, for our guide the "value investing, long-term investment" investment philosophy provides a theoretical basis.In this paper, introducing briefly corporate performance evaluation methods, based on EVA targets that take into account all the capital costs of the company that the cost of debt capital and equity capital costs, avoiding the listed company can not meet the minimum return on capital, profit under the false impression that could be more true reflect the company’s operating performance. Therefore, we use EVA index as a measure of corporate performance indicators and the eventual adoption of economic value added per unit of capital (EVAPA) as being the explanatory variable into the empirical analysis studies, The empirical study aimed to analyze the. proportion of institutional investors holding the impact on corporate performance, and examine institutional investors controlling shareholder of checks and balances, as reflected in the model is to investigate the degree of institutional investor interest in checks and balances on the impact on corporate performance. By empirical conclude that the proportion of institutional investors holding the company’s performance, a significant positive impact, institutional investors have the controlling shareholder of checks and balances, and promote the improvement of corporate performance. However, because this computed EVAPA generally small, allowing a smaller regression coefficient between the variables. Finally, according to the results of this research to the development of institutional investors from the capital market, listed companies, institutional investors themselves, the legal system and supervision put forward policy recommendations accordingly:First, continue to deepen the capital market reforms, to further the development of institutional investors to create a favorable market environment for, Second, is to improve the quality of our management and governance of listed companies, enhancing the investment value of listed companies, building a market which helping long-term investment. Third, is to optimize the structure of institutional investors to promote the coordinated development of various types of institutional investors, fourth, to increase supervision of institutional investors to reduce the possible violation of institutional investors.The innovations of this paper are:(1) The second type of corporate governance from the principal-agent problem that the controlling shareholders and minority shareholders interests as the starting point, first inspecting the institutional investor and controlling shareholder under the condition of complete information game behavior, for long-term holdings of institutional investors, must adhere to the supervision of the strategy to maximize long-term benefits. On this basis, to study the active participation of institutional investors control over the competition, the controlling shareholder of checks and balances and its impact on corporate performance.(2) Relative to other domestic research institutions, investors and corporate performance literature, most used in the traditional financial indicators or the value of Tobin’s Q to evaluate the company’s operating performance. This paper introduces the economic value added (EVA) as a measure of corporate performance indicators, as the economic value added indicators for consideration of equity capital, excluding the impact of accounting distortion can be a true reflection of the company’s operating performance.(3) The empirical research was based on China’s capital markets, selecting the listed companies as samples which have achieved full circulation by the end of 2008 to study the relationship between the institutional investors and corporate performance.