Are Qualified Foreign Institutional Investors Real Investors or Speculators: Evidence from China

Abstract

Since the qualified foreign institutional investors (QFII) entered into China’s A-share market officially in 2003, they have made quite abundant profit. Do QFII profit through long-term investment, or seize high quota profit through speculation behavior? This article collects the data of the top ten stockholders and the top ten shareholders of tradable shares during 2006-2009 in China’s A-share market, and analyzes the role of QFII from the QFII holding companies’ profitability, financial and governance characteristics. The empirical results indicate that the companies with QFII ownership are superior to those without QFII ownership in the profitability, the main financial characteristics and the corporate governance indicators, and the further regression analysis result indicates that QFII ownership can improve the company performance to some extent. These results show that introducing QFII to China will be able to promote capital market development to a certain extent.