Empirical Study on Institutional Ownership Preference for Listed Company's Profitability and Governance Structure

摘要

Since the 1960s,rapid development of institutional investors is a prominent feature of global financial market.In china,full circulation of stock will realize after the completion of Split Share Structure Reform.Under the circumstance of institutional investors holding a large scale of stock,will they change their invest style? Whether they place more emphasis on value investment and concerning about long-term development of their enterprises or utilize their advantage of controlling large scale of capital,continue to use "dominate" and "speculation" methods to seek short-term interests? In this paper,we focus on institutional investor’s preference for stocks,trying to find certain evidence from their stock preference to judge whether the institutional investors were intended to make long-term investment or short-term speculation when they invested in stocks.Here we use the stocks holding by institutional investors at the end of the fourth quarter from 2003 to 2007 to perform empirical analysis.The regression results of non-equilibrium panel data model indicate that institutional investors preferred companies with higher financial achievement.That indicates institutional investors pay much attention to the basic factors of the companies which they choose and they are prepared to carry out long-term investment.As for our study on corporate governance variables,2 of the 4 selected variables reveals that institutional investors prefer the companies with a reasonable structure of corporate governance.It shows the corporate governance level is taken into consideration by institutional investors when selecting stocks.The ex ante effect reveals that institutional investors didn’t intended to perform short-term spinning “speculation”,but to long-term investment when they were investing listed companies.However,whether institutional investors take an active part in the process of “improving” the corporate governance level,whether the ex ante effect exists,whether institutional investors implement active monitoring,are left for further research.