Research Of The Influence On Institutional Investors’ Holdings And The Financial Performance Of Financial Enterprises

In recent ten years, with the constant improvement of the capital market in China, institutional investors developing rapidly, the proportion of shareholding increases quickly. Institutional investors occupy the dominant position in Chinese capital market gradually, and have a vital role to improve the corporate governance and the company’s financial performance. In general, the characteristics of the financial enterprises to conduct business are high liability and high risks; it will affect a broad range once the business conditions appear problems. Therefore, this paper takes the financial enterprise as an example, on the basis of theoretical analysis, researches on the relationship between institutional investors and financial performance. The study results can help financial companies to optimize the allocation of resources and improve business performance. This study is of great practical significance.Firstly, through summary to the related research results by domestic and foreign scholars on the financial performance and institutional investors, found that among which most of scholars agree to institutional investors can help the companies’ financial performance. What’s more, according to research at home and abroad, summed up the insufficient that current scholars’ research on specific industries, performance evaluation index and empirical robustness test, and taking this as the breakthrough of this paper.Secondly, with analysis of the current situation of China’s institutional investors holdings, found that development of institutional investors are diversified, and the proportion of shareholding increases ceaselessly, have certain strength to participate in corporate governance. And on this basis to reveal reasons of institutional investors affect company financial performance, indicating that institutional investors have the force to participate in corporate governance, and the ways of participation are increasingly diversified. Therefore, the theoretical analysis shows that: China’s institutional investors have certain strength and power, as well as can participate in corporate governance by a wide range of ways, to influence the company’s financial performance.Thirdly, taking the financial enterprise data from 2010 to 2013 as the research object, through constructing the financial performance index system of the financial company, and propose to use principal component analysis method to obtain the comprehensive financial performance indicator. Then this paper makes an empirical test on the relationship between institutional investors’ holdings and financial performance of financial company. Moreover, arrange robust test on the empirical results by using a lagging period indicator of financial performance. The empirical study indicated that: the holdings and the balances of institutional investors positively related to the financial performance; to various types of specific institutional investors, the insurance companies and QFII holdings shows positive correlation with financial performance significantly at the level of five percent and ten percent, and non-financial listed companies and financial performance are negatively correlated at the level of five percent, while the low holdings of other institutional investors didn’t show a significant relationship with financial performance. As a result, it demonstrated that China’s institutional investors’ holdings have positive effect on financial performance of financial enterprises; meanwhile due to the difference of every institutional investor’s characteristics and holdings ratio, effects are also difference with different types of institutional investors.Finally, according to the conclusions of theoretical analysis and empirical study, in order to make institutional investors play a more positive role in financial business management, further improve financial performance. This paper proposes some relevant suggestions: our country should upgrade the construction of Chinese multi-level capital market system, increase the development types and the ratio of China’s diversified institutional investors, and improve the relevant legal system to promote the role of the institutional investors.