Influence Of Institutional Investors’ Shareholdings On The Listed Companies’ Debt Financing Research

With the continuous development of China’s capital market, as the backbone of the capital market, institutional investors increasingly have become more and more important. Institutional investors have the advantages of the funds, information and other aspects. Institutional investors are not only the important capital market participants, as the shareholders of the company, but also optimize the emerging forces in the corporate governance. Debt governance is an important part of corporate governance. Because of the special economic background, it has leading the listed companies prefer equity financing. In debt financing, due to the high cost of long-term debt financing and strictly debt constraints, have resulting the short-term debt preference in China’s listed companies. Two financing preference have imbalanced the capital structure of the listed company. It affects the company’s long-term development. In both backgrounds we investigate in the participation of institutional investors in corporate governance; whether it can inhibit the two financing preferences and balance the financing structure have important theoretical and practical significance.First of all, this paper analyzes the willingness, purpose and motivation of institutional investors to participate in the company’s finance governance. Institutional investors have incentive and abilities to participate in the financing governance based on the interest and its strength. In addition, the purpose of institutional investors participates in the financing governance is to share the improved interests of the company. Secondly, we analyzed the internal and external mechanisms of institutional investors to influence financing governance of listed companies. Also, we analyze the means which institutional investors to participate in financing governance. Thirdly, according to the theory and mechanism analysis, we presented some empirical assumptions. Then we prove the relationship between the institutional investor’s holdings with long-term and short-term debt financing. Based on the empirical research results, we proposed some related recommendations.This study shows that institutional investor’s holdings have different effects on the long-term and short-term debt financing. Institutional investor’s holdings have positively correlation with long-term debt levels, indicating that institutional investors have improved the level of long-term debt of the listed company. It effectively inhibits the equity financing preference. But the institutional investor’s holdings have negative correlation with the level of short-term debt which is indicate that institutional investors reduce the short-term debt financing preferences. It proves that institutional investors participate effectively in the governance of corporate finance and balance of the debt financing structure. At the same time, the paper also analyzes the differences influence of different industries institutional investor’s holdings and debt financing. The results of this study provide new evidence for institutional investors to actively participate in corporate governance.