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On the review of the development of research on the relationship between the performance of institutional shareholder activism and the company

Author: Qian Lu From: www.yourpaper.net Posted: 2010-05-31 19:28:33 Read:
Keywords: the institutional investor activism company performance
Abstract: the since the 80's of last century, the rise of institutional shareholder activism, institutional shareholders of Target Corp performance has received extensive attention.Some western scholars think, institutional shareholder activism helps corporate performance improvement, while others believed that the institutional shareholder activism and even has a damage effect on firm performance is invalid.Western scholars from different perspectives empirical test on the relationship between institutional shareholder activism and corporate performance analysis, mainly on the ratio of institutional investors and corporate performance, the relationship between institutional investors to participate in corporate governance changes, after the company value of institutional investors to participate in the management of change after the earnings and the number of institutional investors and companies proposal the performance of the correlation.
, problem
The traditional theory is that the company in the shares of the company are highly dispersed condition, manager of the company has the right of control.The shareholders as the client, the manager as a trustee, conflicts of interest and information asymmetry between the two, which may cause adverse selection and moral hazard problem.Managers will be through personal power expansion and the use of company resources for personal gain and damage the interests of shareholders; can also make them from losing position risk company policies, and difficult for shareholders to detect.In this way, the shareholders of the company can only rely mainly on the stock trading influence and restrict the behavior of manager.
Since 80's in last century, with the development of institutional investors, institutional shareholder activism of institutional investors (institutionalshareholderactivism) rise, can be used as a control mechanism to replace the external control market surveillance agents and guarantee them according to the contract agreed that, this way can eliminate information asymmetry between shareholders and agent, and the improper behavior of agents to punish, in order to solve the agency problem in the traditional sense.Since then, research about the impact of institutional shareholder activism on the Target Corp performance has become increasingly active.Company performance is the basis of listing Corporation stock price, is a comprehensive listing Corporation quality mark, is also a shareholder interests.Institutional shareholders can effectively supervise the manager, eventually to see whether can improve the company's performance.Therefore, research on the institutional shareholder activism and corporate performance has become the focus of the institutional shareholder activism.The research mainly from the following two aspects: one is the institutional investment have enough power and ability to supervise the manager, which will help the company performance improvement; two is the empirical test of institutional shareholder activism and corporate performance.
In recent years, securities supervision department of the government of China issued a series of policies and measures to promote institutional investment development, hope that through the development of institutional investors, and promote the healthy development of enhanced listing Corporation performance and stock market.With the development of institutional investors, the impact on China's listing Corporation and the stock market is increasing step by step.To a certain extent, the development of the stock market has played a positive role in promoting.However, institutional investors in reality there are problems of stock manipulation, and listing Corporation conspiracy.Analysis and evaluation of institutional investors and corporate performance, in our country has important theoretical and practical significance.Therefore, we have the necessity to western scholars to sort out relevant research and review system.
Effect of two, institutional shareholder activism on corporate performance discussion of
The shareholder activism of effective supervision mechanism 1.
(1) the institutional investors have an incentive to supervise company management.Institutional shareholder activism of effective supervision on the supporters argue that institutional investors will actively participate in corporate governance, incentive and control problem solving dispersed shareholding in the Large Firm.
Grossman and Hart pointed out that, to improve the performance of the company is a kind of public goods.As the biggest consumers of public goods, large shareholders can get more improvement of firm performance benefits, so they can ensure the supply of public goods.
Demsetz, Demsetz and KHN that institutional investors can be regarded as a potential control of agency problems, because of their increasing share so that they have a strong incentive to the performance of the Monitor Company and management behavior.
Diamond believes that need large intermediary agencies for the assets decentralization and economies of scale, so that they become the effective mechanism to solve the agency problem.Black and Pound to institutional investors to actively supervise company acts as a natural response to the decline of the external control market, with the increasing size and concentration of ownership, institutional investors through intervention to corporate governance in order to protect their interests, on the other hand they act as financial intermediaries fiduciary investment responsibility, which makes them close supervision to protect the investment from loss.
Shleifer, Vishny, Agrawal and Knoeber argue that, due to the large investors and their investment funds are closely related, for their own interests, they have the motivation to have enough ability to monitor and improve corporate governance.
(2) the institutional investors have the ability to supervise company management.Stlslit argues that institutional investors with respect to individual investors has information advantage, they have enough economic strength to hire a financial analyst to collect and process information, which makes the decision-making in a more fully grasp the information based on them; on the other hand, the institutional investors have voting rights brought influence, Lu Qing and the supervision of corporate management reputation and growing influence, which makes them have enough ability to oversee the management of the company.
(3) the institutional investors can effectively supervise company management and improve the performance of the company.Institutional investors can incentive and control helps to ease the large dispersion shareholding companies, so as to enhance the value of the company.Shleifer, Vishny and Admatieta1. that institutional investors from two aspects to improve company efficiency and performance: first.Institutional investors in the huge investment companies and their fiduciary responsibility so that they have a strong incentive to supervise the behavior of managers, this kind of supervision can improve management efficiency and decision quality company.Second, the institutional investors to study the quality of listing Corporation to select efficient corporate investment, which makes the limited funds to get the maximum use of.Pound argues that institutional investors have more expertise and knowledge compared with the small shareholders, and economies of scale make the institutional investors only need spend supervising costs low, so institutional investors shareholding increased can reduce agency problems, improve the performance of the company.
2 institutional shareholder activism invalid.
(1) institutional investors do not supervise company management motivation.Institutional investors may become a passive investor, when performance is not good, they will choose to sell stocks, but not to spend resources to supervise the management of the company and improve company performance, mainly for the following reasons:
First, the target is shortsighted, conflicts of interest, costs and benefits analysis of such factors as institutional investors to institutional investors become negative, short-term investors, no supervision company management motivation.Graves believes that, because of a mutual fund is based on the fund manager every year, even the performance evaluation for each quarter to be rewarded, so fund managers can not be in the investment decision to take the long-term investment strategy.Drucker points out, fixed income pension participants were asked to fund managers sell their shares to obtain short-term gains, which makes the pension to adopt a long-term investment strategy.Bhide, Demirag and Maug are considered for institutional investors, their goal is to maintain the liquidity of shares held by and hope that a short-term gains, the supervision and management of the company in order to obtain long-term gains more important.
David and Kochhar believe that institutional investors hold the short-sighted attitude to investment, only to the short term to beat the market benchmark rate of return as the goal, this short-termism leads them to overreact to information and excessive trading, manager behavior cannot effectively supervise company; business ties between the institutional investors and companies will hinder their positive, effective supervision company.Pozen argues that institutional investors generally passive investors, unless the shareholder activism of the benefits outweigh the costs, they will be involved in corporate governance.Webb, Beck and Mckinnon argue that institutional investors hold the shares are not big enough, they could not be supervised company achievement motivation.Management and supervision company brought about by high transaction costs so that they do not want to intervene in corporate governance.
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