| Summary: | The objective of this article is to study the impact of institutional ownership on corporate performance, with a greater emphasis on learning whether pressure-sensitive institutional investors (those with an existing or potential commercial transactions with the target company) and pressure-resistant investors (simply maintaining an investment relationship with the target firm) have a different impact on firm value. Besides, state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs) are important characteristics of China's capital market. Compared with non-state-owned enterprises, the appointment of the management and the formulation of company business plans in state-owned enterprises are more susceptible to state intervention. Therefore, it is difficult for institutional investors to use their professional advantages and become a qualified supervisor. Based on this reason, it is also significant to test whether institutional investors have a different impact on firm performance between state-owned and non-state-owned enterprises.
To make the results of this paper more reliable, based on the theoretical analysis, this paper selected 3270 companies listed in Shanghai and Shenzhen stock exchanges from 2008 to 2019 to do an empirical analysis, and there are a total 25,864 firm-year observations in our regression model. Then, the Breusch-Pagan Lagrangian multiplier and Hausman is used to confirm that the panel fixed effect model is the best one to fit our model, and the result of the chow test also shows that the difference of coefficients between state-owned and non-state-owned enterprises is significant.
This research ultimately concludes that the aggregate institutions holding is positively related to firm performance, also, this positive effecting is only existing for pressure-resistant institutional investor and is much stronger in state-owned enterprises. By contrast, the increasing shareholdings for the pressure-sensitive institutional investor will damage firm value both in state-owned and non-state-owned enterprises, because they will the collaborate with target firm’s manager for common interests even at the expense of the company performance.
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