Heterogeneity of Institutional Investors and Investment Effects: Empirical Evidence from Chinese Securities Market

Abstract

With social security funds and securities investment funds as research objects, this paper makes an empirical study on cross-sectional data in the period 2008–2010 of listed companies of which the stocks are heavily held by institutional investors. Using property rights theory and agency theory, this paper verifies the following hypothesis: securities investment funds and social security funds face different political and social pressure, and have different payment mechanisms for managers, thus the fund owners may have conflict or convergence of interests with companies’ administration, which may affect contrarily the investment value of companies. This paper contributes by demonstrating the influence on companies’ investment effects of heterogeneity of Chinese institutional investors, which provides new evidence for judging, in the era of diversified institutional investors, the different roles of different institutional investors in corporate governance and performance, and offers supporting evidence for China to formulate development strategy for institutional investors.