Heterogeneity of Institutional Investors, Features of Ultimate Controllers and Large Shareholders' Tunneling: Based on the Related-party Transactions

Wu Xiancong, Zhang Jian, Hu Zhiying

Foreign Economics & Management Vol. 38, Issue 06, pp. 3 - 20 (2016)  DOI:10.16538/j.cnki.fem.2016.06.001

Abstract

The conflicts of interests between large and small shareholders emerge and constantly involve along with the development of modern enterprises. And unfair transactions by big stockholders through interconnected networks knitted based on control rights become an important means of the expropriation of minority shareholders & also are the social focus. From a perspective of different characteristics of institutional investors, this paper studies the prohibition role of independent & dependent institutional investors and long-term & short-term institutional investors in block shareholders' tunneling in related-party transactions, and then discusses the role of institutional investors in state-owned and family enterprises under differentiated ultimate controllers. Empirical study shows that only dependent institutional investors that have no business contacts with companies and less government intervention and institutional investors with longer stockholding duration play an effective role in the inhibition of block shareholders' tunneling in related-party transactions. Furthermore, in state-owned enterprises, institutional investors can effectively reduce the expropriation of minority shareholders in related-party transactions by big stockholders, but in family enterprises maintained by the relationships like blood and kinship, institutional investors cannot decrease related stockholders' tunneling. This paper breaches the homogeneity hypotheses of institutional investors, reveals the effect of organizational system attribute on the exertion of the role of institutional investors, and tests the interrelation between government governance and corporate governance in special context.

Keywords

characteristic of institutional investors; block shareholders' tunneling; related-party transaction; family enterprise; state-owned enterprise