The Relationships Between Institutional Investors And Corporate Transparency

Institutional investors are the backbone of capital markets. Institutional investors have a standard of selecting successful entrepreneurs, enterprise and industry standards, and also have a clear investment strategy, which always put the interests of holder first, and is not tempted to the temptation of short-term interests, to guide the flow of funds pouring capital markets. Information is the bridge or link of listed companies and investors. With the rapid development of institutional investors, the relationship between institutional investors and the listed companies’disclosure of information become a subject of concern among theoretical circles.At first this paper reviewed the documentary and theory about the institutional investors and corporate transparency, studied the behavior of institutional investors and the factors that affect the listed company disclosing information, and studied the interaction between institutional investors and the corporate transparency.Then the paper collected 369 listed companies in Shenzhen Stock Exchange from 2005 to 2009 and analyzed with panel data. This paper using Ordered Probit model study the relationship between institutional investors and listed companies’information disclosure and its influencing factors, found that after a point the number of institutional investors on the impact of corporate transparency is not significant, not as people said, the more, the better. At the same time, we confirm that holdings of institutional investors can play an active role in information disclosure of listed companies, with the increase in shareholding of institutional investors, corporate transparency accordingly improved, but after a point the relationship is not so significant. Because the high shareholdings is consist with lots of small shareholdings, the institutional investors have no power or interest to supervise the corporate behavior. At last, using two-stage least squares and three stage least squares regression repeatedly on the sample companies. Though excluded the omitted variables and endogenous caused by causality, we still get the same conclusion.Finally, the conclusions of this paper put forward policy recommendations, and described the limitations of this study.