An Empirical Research For The Heterogeneity Of Institutional Ownership And Investment Efficiency

Institutional investors play a very important role for the rapid development of China’s economy and improvement of the capital markets. There have been a lot of academic studies talked about whether the institutional investors are participating in corporate governance. However for the role of the institutional investors in the corporation governance activities, two distinct hypotheses holed in academic, which are called negative supervision hypothesis and effective supervision hypothesis. Negative supervision hypothesis think that institutional investors have a negative attitude to supervise operations, and generally make a passive decisions by "voting with their feet". And effective supervision hypothesis hold the point that institutional investors will voluntarily participate in the company’s governance activities and participate in company decisions by "voting with hands". Meanwhile academia generally takes cost-benefit analysis as an important foundation for the different decisions of institutional investors. If the cost of actively involvement in the supervision of listed companies’ operation is greater than the gains acquired by regulators, the institutional investors would choose negative governance.In addition, scholars have taken kinds of studies focus on the mechanism for institutional holders’ participation in corporate governance all around the world, but they still have controversy opinions on study of the heterogeneity of institutional investors with corporate investment efficiency. Because of the imperfect system and limited efficiency of China’s capital market, non-efficient investment problems rapidly occur in listed companies, which are contrary to the achievement of the basic objectives of financial management-enterprise value maximization. Therefore, there must be some practical significance to study the impact of the heterogeneity institutional investors on corporate governance, especially on non-efficiency investment.Firstly, I made a review for the existing studies on institutional investors and corporate governance, institutional investors and investment efficiency and impact studies on heterogeneity of institutional investors. Did an analysis on how can institutional investors improve the corporate internal governance, and inhibit non-efficiency investment through the supervision of the company’s management based on the agency theory, asymmetric information theory and other theories tools. And taking the data samples of all the A-type listed company in China between2009and2012, led an empirical study on the effect of the heterogeneity of institutional investors’ governance on the investment efficiency of listed company through institutional investors ownership concentration, independence, regional differences.The empirical results show that:(1) the proportion of institutional investors have a significant negative correlation with over-investment while no significant correlation with insufficient-investment, indicating that institutional investors have somehow effect on the governance of non-sufficient investment;(2) independent institutional investors will be more actively involved in corporate governance, suppression of non-efficient investment behavior over non-independent institutional investors;(3)qualified foreign institutional investors stake have significant negative correlation on overinvestment and underinvestment, indicating QFII can actively participate in corporate governance, under the consideration of the regional differences.Finally, I generated the following recommendations, based on theoretical analysis and empirical results:(1) strengthen external governance environment the securities market, improve the basic system of capital markets, establish and improve the laws and regulations of the Securities Investor Protection;(2) improve their governance of institutional investors structure and strengthen its oversight of internal driving force of corporate governance;(3) continue to vigorously develop institutional investors, improving their voting right, take more attention on diversification of institutional investors to improve the structure of institutional investors in the capital market.Research contribution of this paper is mainly reflected in the following two aspects:(1) In this paper, I use share percentage, independence and qualified foreign institutional investors to measure the heterogeneity differences of institutional ownership concentration, holding motivations, as well as regional location for different effect on the efficiency of investment, in order to reflect the behavior of institutional investors preferences at a certain time point more directly and effectively.(2) Did the study on the effect of institutional investors’ participation in capital market based on the sight of non-efficient investments in listed companies. And examining the preference of decision-making for the heterogeneity of institutional investors on two dimensions as over-investment and under-investment to ensure whether shareholders is activism, and provide supporting evidence for the resolution of the current policies promulgated to develop institutional investors.