Influencing Factors of Institutional Investors Shareholding Stability

Peng Han,Wunhong Su,Feng Niu

doi:10.1177/21582440211050400

Peng Han, Wunhong Su + Show 1 more

Open Access

https://doi.org/10.1177/21582440211050400

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Abstract

The premise for institutional investors to participate in firm innovation governance and promote firm innovation’s positive role is that institutional investors have specific decision-making power and are willing to participate in firm innovation governance. Therefore, the influencing factors of institutional investment shareholding stability are an important issue. This study investigates the impact of business connection, risk preference, policy factors, market factors, and firm factors on institutional investors’ shareholding stability using regressional analysis based on the samples of Chinese A-share listed firms from 2014 to 2017. The main findings show that institutional investors with higher business connections, risk preferences, and performance ranking intensity have poor shareholding stability. The reform has significant investment constraints on non-risk preference institutional investors but has insufficient investment constraints on risk preference institutional investors. The substitution and interaction between firm factors and the natural endowment of institutional investors occur alternately. This study’s results provide important policy implications to strengthen related business supervision between institutional investors and shareholding firms. The policy implications include relaxing the investment proportion restriction and establishing a market-oriented performance ranking and institutional investors’ evaluation mechanism.

Highlights

As early as 2001, China put forward the “unconventional development of institutional investors” strategy
This study aims to investigate the impact of the influencing factors on institutional investor’s shareholding stability
The findings seem to suggest that the institutional investor shareholding stability first comes from natural endowments

Summary

Introduction

As early as 2001, China put forward the “unconventional development of institutional investors” strategy. It has formed a diversified pattern in which more than ten institutional investors, such as securities investment funds, brokerage financial products, private equity funds, and QFII, have been jointly promoted and developed. Whether there is a business relationship between institutional investors and firms, institutional investors are divided into pressure-sensitive and pressure-resistant types. Bushee (2001) divides institutional investors into short-term, quasi exponential, and focused on cluster analysis based on the diversification of institutional investors’ portfolios. Based on Bushee’s (2001) research, Koh (2007) adds some institutional investors’ characteristics in the new environment and divides institutional investors into short-term and long-term types

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