Does Institutional Ownership Improve Firm Investment Efficiency?

摘要

Our study examines the influence of institutional investors on firm investment efficiency based on nonfinancial firms listed on Chinese stock exchanges over the period 2009-2014. Our results show that institutional ownership generally improves firm investment efficiency. However, after considering the independence of institutional ownership, we find that only pressure-resistant institutional ownership increases firm investment efficiency by alleviating both overinvestment and underinvestment. We also find that the pressure-resistant institutional investors' horizon matters. In particular, pressure-resistant institution investors who have higher shareholdings are more stable-that is, they tend to hold shares longer and thus have a more intensive effect on firm investment efficiency. Our results also show that relaxing external financing constraints, reducing agency costs, and increasing executive incentives significantly improve firm investment efficiency. The results are robust to controlling for endogeneity. Documenting the positive influence that pressure-resistant institutional investors have on firm investment efficiency and the channels through which they improve firm investment efficiency should be of interest to investors, regulators, and academics.