Abstract
This study investigates the influence of institutional shareholder activism on corporate transparency. Employing the data of listed firms in Chinese equity market from 2002 to 2012, this paper examines the impact of institutional investor shareholding on comprehensively measured corporate transparency across three dimensions: accounting information transparency, stock price transparency and corporate governance transparency. We find that institutional investors significantly improve the corporate transparency on the three perspectives. Furthermore, the result reveals that the effect of institutional shareholder activism on corporate transparency is robust adopting dynamic model. In order to solve the endogeneity issue, we employ simultaneous equations to check the causality between institutional investor shareholding and corporate transparency and the empirical results are consistent. Finally, we find that Fund and Qualified Foreign Institutional Investor (QFII) play a positive role on improving corporate transparency compared to other institutions in China. Our findings have important policy implications for ongoing policy debates on corporate transparency and the role of institutional investor.
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