The Effect Of Institutional Investors’ Participating In Corporate Governance

With the rapid growth of economy in China, the issues related to corporate governance have been paid attention and researched by a great deal of domestic and foreign experts in recent years. Institutional investors plays a more and more significant role in chinese financial market and contribute to enhance management efficiency and improve the organization structure. There are various findings regarding the institutional investors participating in corporate governance of listed companies and the regulations mechanism in developing countries.This research consists of qualitative and quantitative analysis. Firstly, it investigates and concludes the attributions and effects of corporate governance and identifies what and how factor could affect the performance of firms.1263samples from the listed companies in2012in Chinese stock market are taken into account to run the further regression analysis to estimate the relationship between the capital structure brought by institutional investor and the performance of listed company. The empirical results indicate that there is significant positive correlation between the power of institutional investors in companies (represented by the shares held) and the firms’financial performance. It concludes that institutional investors’participation in the corporate governance can have a positive effect on strategy. With the increase in the proportion of institutional investors holding, company performance first increased and then decreased, showing inverted U-shaped trend. However, in the domestic companies, the performance of the company has significant positive linear correlation with the increase in the proportion of institutional investors holding.