Top PDF Institutional Investors and Corporate Financial Policies

Institutional Investors and Corporate Financial Policies

Institutional Investors and Corporate Financial Policies

problems. Grullon, Michaely and Swaminathan (2002) offer a “maturity hypothesis” to explain payouts linking the decision to pay dividends (or repurchase) with a firm’s age and resultant decline in risk and investment opportunities. Grullon and Michaely (2004) find that repurchase announcements get a more positive reaction among firms that are likely to overinvest. They interpret this as indicating that these firms are signaling a reduction in agency costs. Similarly, Officer (2010) finds that dividend initiations get higher announcement returns in firms with poor investment opportunities and high cash flow. In tests on 4,000 companies from 33 countries, La Porta et al. (2000) offer support for an agency model that they call the “outcome model”. In this model, firms make payouts because the opportunities to steal or misinvest are legally restrained and minority investors are powerful enough to extract the payments. Gugler (2003) provides evidence that Austrian firms that do not have good growth prospects make payouts. He finds that changes in dividends result in an almost equal and opposite change in R&D and capital investment indicating that payouts compete with R&D and capital investment for internal cash flows.
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Corporate Financial Policies With Overconfident Managers

Corporate Financial Policies With Overconfident Managers

Signalling. The apparent absence of inside information makes a rational signalling inter- pretation of our measures difficult. If late option exercise and bold statements to the press are signals of strong future stock price performance, those signals seem ineffective: CEOs who send them are the least likely to issue equity and their stock does not display positive abnormal performance. On the other hand, investors might have expected worse future performance in the absence of option-holding and strong statements in the press, leading to even less equity issuance. Our findings using the Post-Longholder measure cast some doubt on this interpre- tation. If private information drives managerial financing preferences for debt over equity and delayed option exercise (and press coverage) signals that information to the market, we would expect a weaker impact of past ‘signals.’ Instead, we find little difference between the effects of past and contemporaneous late exercise on financing choices.
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Financialized Hollywood: Institutional Investment, Venture Capital, and Private Equity in the Film and Television Industry

Financialized Hollywood: Institutional Investment, Venture Capital, and Private Equity in the Film and Television Industry

investment in an entrepreneurial venture by an established corporation. The parent corporation (e.g., Comcast) operates a financial intermediary or corporate venture capital program (e.g. Comcast Ventures) which makes equity or equity-linked investments in early-stage, privately held companies (e.g., Vox Media). Originally created to allow customers to finance the purchase of consumer products manufactured by the industrial division, the financial arms of major corporations are now often growing faster than their manufacturing divisions. Their financial activities, products, and global scale have come to resemble investment banks and hedge funds more than those of their parent companies. Three short-lived waves of CVC occurred during the 1960s, 1980s, and 1990s, but the current wave appears to be both more pronounced and longer lasting, with corporate investors accounting for roughly 15 percent of all venture capital activity since 2000. 22 For large media companies, investment in tech start-ups through CVC has many functions: earning profits that do not need to be shared with talent, preventing new competition from gaining a foothold, and maintaining an oligopoly.
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ROLE OF INSTITUTIONAL INVESTORS AND RESERVE BANK OF INDIA IN CORPORATE GOVERNANCE ACTS

ROLE OF INSTITUTIONAL INVESTORS AND RESERVE BANK OF INDIA IN CORPORATE GOVERNANCE ACTS

The article of affiliation comprises the second significant report which must be enlisted for the situation of the specific sorts of organization along with the notice. Companies have groom in expressed to be daintily perceived as financial organization with wide extending social and business duty. They are not, at this point a marvel. An organization is the focal point of an unpredictable trap of the human connection. The clashing interest of the gathering of individual like investors, who gives of capital and interested distinctly in a consistently rising separated bends; the board who are interested in higher compensation; the workforce, which is interested in more pays and conceivably less work and the buyers of the organization's item who are interested in better quality at least conceivable cost, must be held in a condition of congruity. The article establishes a set so governs managing the issue so organization. Each article is a standard for the guideline of relations among organization and the investor and the administration. Each article is a standard book of the organization. Article gives the standard book of the relationship of individuals and connection Article of Association examine inside business of the organization and their exchange identifying with business.
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Essays on Institutional Investors

Essays on Institutional Investors

The dependent variables in Panel A are returns on HFR style indexes, classified by HFR as follows: Equity Hedge funds invest in core holding of long equities, hedged at all times with short sales of stocks and/or stock index options. Market Neutral funds seeks to profit by exploiting pricing inefficiencies between related equity securities, neutralizing exposure to market risk by combining long and short positions. Event Driven funds target on corporate transactions such as mergers, financial distressing, tender offers etc. Macro involves investing by making leveraged bets on anticipated price movements of stock markets, interest rates, foreign exchange, and physical commodities. Arbitrage focuses on exploiting pricing anomalies on equity, fixed income, derivative and other security types. Short Bias specializes in short-selling securities. Real Estate funds emphasize investment in securities of the real estate arena. In Panel B, the dependent variable is the monthly return on the aggregate long positions of hedge funds, as reported in their 13F filings.
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Can Institutional Investors Fix the Corporate Governance Problem? Some Danish Evidence

Can Institutional Investors Fix the Corporate Governance Problem? Some Danish Evidence

Admati, Pfleiderer and Zechner (1994) study large shareholder activism and risk sharing in financial markets. Their model relies on a traditional asset pricing model with a number of risky securities as well as a risk free asset. They assume that investors are risk averse, but their model only assumes that there is one single large investor. Moreover, they show that in a portfolio context large shareholder activism is consistent with equilibrium, even if the initial holdings of the large shareholder are zero. Maug (1998) analyzes how market liquidity influences the free rider problem. He develops a model, where he shows that a more liquid market leads to more monitoring, because it allows an investor to cover monitoring costs through informed trading. If stock markets are less liquid, large shareholders will engage in less monitoring. In order to avoid the commitment to monitor, the large shareholder will have smaller stakes in more companies by diversification.
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Game Analysis of Institutional Investors Participating in Corporate Governance

Game Analysis of Institutional Investors Participating in Corporate Governance

Tunneling effect, named by Shleifer, is a common fraud in which controlling shareholders and the management collude to expropriate the interests of minority share- holders. As a countermeasure, China has introduced the institutional investors as an external governance mecha- nism for better corporate governance. Since the China Securities Regulatory Commission made proposals to de- velop the mechanism of institutional investors in 2000, a series of policies and measures have been issued to pro- mote its development. Recent years, with the rapid de- velopment of institutional investors and their participa- tion in corporate governance, researchers keep wonder- ing, could institutional investors effectively restrain the tunneling behavior? Will they act as active supervisors or bystanders, or will they collude with the management to trample over the interests of the minority shareholders when confronting with the tunneling behaviors?
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Shareholder Types, Corporate Governance and Firm Performance: An Anecdote from Indian Corporate Sector

Shareholder Types, Corporate Governance and Firm Performance: An Anecdote from Indian Corporate Sector

significant relationship with the value of the firm and lastly institutional investors have a significant positive influence on the firm value. Shleifer and Vishny (1997) have focused on the subject of corporate governance from the perspective of agency problem, sometimes referred to as the separation of ownership and control. The basic question of corporate governance is to find out how investors get the managers to give them back their invested money. The paper discusses the role of concentration of ownership as an approach to corporate governance and takes into account ownership by small investors and concentrated ownership; i.e. by large shareholders) which reduces agency costs and thereby improves corporate governance and firm performance. The paper also discusses the negative impact of state ownership on firm performance. Thomsen, Pedersen (1998) examine the impact of ownership structure on company economic performance in the largest companies from 12 European nations. Ownership structure is measured by the identity and share of the largest owner. Performance is measured by return on assets, market to book values and sales growth controlling for industry. Five categories of shareholders have been identified: banks, other financial companies (institutional investors), other non-financial companies, personal/family and government. The authors find evidence of a bell-shaped (first increasing and then decreasing) effect of ownership share on assets returns and market-to-book values of equity. Companies whose largest owner is a financial institution have higher market-to book values than companies in which the largest owner is a family, another company or the government. The effects on asset returns are qualitatively identical, but weaker and insignificant except for a negative effect of government ownership
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Corporate social responsibility and shareholder proposals

Corporate social responsibility and shareholder proposals

Karpoff et al. (1996) found that firms with poor prior financial performance (regarding market-to-book ratio, operating returns, sales growth) are more likely to attract shareholder proposals in general. They study proposals on corporate governance issues during 1986-1990 and rely on 866 proposals from 317 companies. Using logistic regression, they conclude that these insider-initiated governance proposals do not seem to increase firm value, improve operating performance, or influence firm policies (Karpoff et al. 1996). Schooley et al. (2010) also rely on logistic regression and study governance proposals but focus on the probability of such shareholder proposals being filed. They used matched pairs analysis and have 182 firms with proposals on governance and study the period 1986-2003.They establish there is a significant relationship between corporate governance shareholder proposals and the firm’s governance characteristics, especially ownership concentration. The intuition behind the positive impact of ownership concentration would be that fewer shareholders have to be convinced to vote in favor of the shareholder proposal. The positive relationship from institutional ownership suggests that proposal filers count on the voting support of institutional shareholders. Tkac (2006) and Rojas et al. (2009) find that activists are more likely to target large, well-known companies to maximize the impact of their campaign. They conclude so on the basis of univariate analysis of a U.S. sample over the years 1992-2002 and 1997-2004, respectively. González-Benito and González- Benito (2008) rely on survey data and investigate how firm characteristics relate to stakeholder environmental pressure in the Spanish manufacturing industry. Flammer (2015), in a quasi-natural experiment, studies the effect of CSR shareholder proposals on financial performance. She uses an extensive dataset of U.S. firms during the period 1997-2012 and estimates a discontinuous regression model. She finds that the adoption of close call CSR proposals can be associated with a value
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Corporate social responsibility, institutional investors’ ownership, financial restatements and sell-side analysts’ stock recommendations

Corporate social responsibility, institutional investors’ ownership, financial restatements and sell-side analysts’ stock recommendations

In Malaysia, the capital market regulators have recently given prominent attention to issues such as corporate responsibility (CSR), shareholder activism and integrity in financial reporting by issuing the Sustainability Reporting Guide (2015) and Malaysian Code for Institutional Investors (2014). Given the importance of these issues, this study examines whether CSR, institutional investors’ ownership, and financial restatements influence stock recommendations made by analysts. It employs a dataset from a panel of 285 Malaysian public listed companies (PLCs) for the period 2008 to 2013 (737 company-year observations). The results show a positive and significant influence of CSR reporting on the stock recommendations, which means that analysts issue more favourable stock recommendations for companies with higher CSR disclosures. Further, the findings indicate that the presence of both transient and dedicated institutional investors are viewed positively by analysts. In particular, the results indicate that analysts issue more favourable stock recommendations for the companies with higher levels of transient and dedicated institutional investors’ ownership. In addition, the results also show that analysts tend to give favourable stock recommendations for companies that restated their financial statements, contrary to expectation. These findings imply that analysts tend to echo government initiatives by giving favourable stock recommendations to companies with greater engagement in CSR activities and the ability to attract institutional investors. The findings also suggest that analysts view financial restatements as informative rather than opportunistic. Overall, these findings should be useful to PLCs and policymakers. PLCs might use the findings to understand the preferences of sell-side analysts towards CSR engagement. Furthermore, policymakers might use it to recognize the important role played by institutional investors in monitoring investee companies and to understand how analysts perceive and evaluate restated companies.
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CORPORATE GOVERNANCE AND INVESTORS' PERCEPTIONS OF FOREIGN IPO VALUE: AN INSTITUTIONAL PERSPECTIVE

CORPORATE GOVERNANCE AND INVESTORS' PERCEPTIONS OF FOREIGN IPO VALUE: AN INSTITUTIONAL PERSPECTIVE

The rapid globalization of financial markets in recent years has been accompanied by a growing number of companies raising capital abroad. Since the late 1990s, foreign Initial Public Offerings (IPOs)—private firms that bypass stock exchanges in their country of origin to ‘go public’ on a foreign stock exchange (Hursti & Mauli, 2007)—have become a significant class of companies, particularly in the U.S. These foreign firms seek equity financing not only for financial goals, but also for marketing, political, and employee relations benefits (Saudagaran, 1988). However, foreign IPOs may suffer from various liabilities of foreignness and have less legitimacy among investors compared to domestic listings (Bell, Filatotchev, & Rasheed, 2012). Although foreign firms may try to increase their appeal to U.S. investors by complying with their expectations in terms of corporate governance, a growing number of finance and management studies (Bruner, Chaplinsky, & Ramchand, 2006; Francis, Hasan, Lothian, & Sun, 2010; Moore, Bell, Filatotchev, & Rasheed, 2012) demonstrate that home country institutional environments significantly affect their valuations and, ultimately, the success of the foreign IPO. At present, there is a dearth of research on how governance factors influence host county investors’ perceptions of foreign IPO value, and how these perceptions are affected by the firm’s home country institutional environments.
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Corporate Financial Policies With Overconfident Managers

Corporate Financial Policies With Overconfident Managers

Signalling. The apparent absence of inside information makes a rational signalling inter- pretation of our measures difficult. If late option exercise and bold statements to the press are signals of strong future stock price performance, those signals seem ineffective: CEOs who send them are the least likely to issue equity and their stock does not display positive abnormal performance. On the other hand, investors might have expected worse future performance in the absence of option-holding and strong statements in the press, leading to even less equity issuance. Our findings using the Post-Longholder measure cast some doubt on this interpre- tation. If private information drives managerial financing preferences for debt over equity and delayed option exercise (and press coverage) signals that information to the market, we would expect a weaker impact of past ‘signals.’ Instead, we find little difference between the effects of past and contemporaneous late exercise on financing choices.
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QUANTITATIVE ACCOUNTING INFORMATION AND BOND MARKET YIELD: EVIDENCE FROM NIGERIA CAPITAL MARKET 2003-2012

QUANTITATIVE ACCOUNTING INFORMATION AND BOND MARKET YIELD: EVIDENCE FROM NIGERIA CAPITAL MARKET 2003-2012

Licensed under Creative Common Page 61 (above) correlation methods, which revealed that the association of earnings with bond returns varies during the stages of financial crisis. The study concludes that earnings liquidation value has an impact on bond returns. Hofmann and Loy (2012) study on dynamic properties of earnings in the bond market provide evidence that accrual and cash flow accounting are not associated with corporate bond returns in the three years preceding the financial crisis. They adopted a point estimate of the conditional mean of annual bond returns, the study revealed a positive and significant association of accounting accrual with annual bond returns during the recent financial crisis. They contend that debt market investors based their investment decisions on credible market -based measures during the recent financial crisis. Easton et al (2009) examined some initial evidence on the role of accounting earnings in the bond market. The study used multivariate analyses techniques (regression analysis) to demonstrate that incidence of bond trade increases during the days surrounding quarterly earnings announcements and that there is a positive association between bond returns and annual earnings. Reiter et al (1986) examined the use of bond market measures in financial accounting research. Bond yields, risk premium and number of bond years to maturity were used as study variables. Their study used the basic models; viz: market model and yields and price model with ordinary least (OLS) method used to estimate the risk premium model. The work sample size of public issues of utility bonds issued in U.S spanning from 1981 through 1984 where drawn from Barrons International, Wall street Journals, the weekly bond buyers and Salomon Brothers price lists for institutional portfolios and other. Their study shows evidence of relationship between the efficiency of the bond market and theoretical bond market risk and return.
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Corporate governance and firms financial performance

Corporate governance and firms financial performance

administration to meet certain well-defined objectives. It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. When it is practiced under a well-laid out system, it leads to the building of a legal, commercial and institutional framework and demarcates the boundaries within which these functions are performed.” Well-functioning corporate governance mechanisms in developing economies are crucial for both local firms and foreign investors interested in the tremendous opportunities that such economies provide.
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A conceptual mapping of the logics of institutional investors' corporate governance responsibilities: The case for "custodian" investor stewardship

A conceptual mapping of the logics of institutional investors' corporate governance responsibilities: The case for "custodian" investor stewardship

2011). “Stewardship aims to promote the long term success of companies in such a way that the ultimate providers of capital also prosper. Effective stewardship benefits companies, investors and the economy as a whole” (UK Stewardship Code, 2012 : 1). Investor stewardship should then contribute as much to their beneficiaries and clients’ welfare than to corporations’, other investors’ and general welfare. The UK Stewardship Code then assumes that investor stewardship aligns and pursues the interests of these different “stakeholders”. This strong assumption can be tracked back to advocates of “shareholder value maximization” who have argued that shareholder value maximization is an adequate corporate objective since shareholders are residual claimants and that shareholder profits mean that each stakeholder has already been taken care of (eg. Jensen, 2002; Sundaram & Inkpen, 2004). In the United Kingdom, the 2006 Company Act promotes the concept of “enlightened shareholder value” which extend the approach of shareholder value to long-term and extra-financial criteria (Harper Ho, 2010).
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Essays on model uncertainty and corporate financial policies

Essays on model uncertainty and corporate financial policies

One potential concern is that the established equilibria might fail to meet the no- arbitrage condition if investors or entrepreneurs are able to replicate their position and short-sell the replicating portfolio. Research on prospect theory documents that the boundary behaviour of the cumulative prospect theory is not well-defined, as in- dividuals with prospect theory preferences would accept gambles with arbitrarily large negative expected values, triggering an infinite shot-selling problem (Azevedo and Gottlieb, 2012; Jin and Zhou, 2013). De Giorgi et al. (2010) further argue that the non-convexity of CPT preferences may lead to the non-existence of market equi- libria, with even a non-negativity constraint being imposed on final wealth. However, as this paper is particularly interested in studying the application of CPT, specifically the probability weighting function, on corporate finance issues, and its implications towards the real-world capital structure decision makings, we restrict our discussion in the gain quadrant by setting the reference point 0, as it is under EU. Generally, we could relax this assumption by imposing non-negativity constraints on final wealth and the assumption of a continuum of agents in the market as in De Giorgi et al. (2010), or by imposing assumptions on priori bounds on leverage and/or potential losses as in Jin and Zhou (2013). Here we show that, in the currently available information set, we may at least find in our binary case model the existence of one set of pricing kernel that can correctly price all the assets and be positive.
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Behavioural Biases of Japanese Institutional Investors; Fund management and Corporate Governance

Behavioural Biases of Japanese Institutional Investors; Fund management and Corporate Governance

Let us summarize the conclusions from our empirical analysis of Japanese institutional investors. Firstly, there is a general short-term bias in the investment forecasting of Japanese institutional investors. Secondly, institutional investors herd and evaluate their performance relative to each other, because they follow the trend and use the same published information. Thirdly, pension fund managers are more sensitive to pressure from their customers than investment trust fund managers, because the former have to face their customers directly whereas the latter do not. Fourthly, institutional investors in general and trust banks in particular have a risk-aversion bias. Since the introduction of disclosure for pension funds’ liabilities in 2001, pension fund management has become increasingly risk averse and more myopic under the influence of sponsors’ corporate management and financial distress. Fifthly, the short-term bias and excess activeness are most conspicuous in life insurance companies. This suggests that insurance companies are forced to achieve short-term returns in order to alleviate financial distress as the economy continues to stagnate. This behaviour contradicts their role as long-term investors.
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Institutional Investors and Corporate Governance

Institutional Investors and Corporate Governance

contained two sets of recommendations for Belgian-listed firms, though it did not discuss the enforcement of these rules. These recommendations highlighted the role of the corporate board and its key subcommittees and discussed their responsibilities and desired composition. This code further recommended that companies provide information about their members, activities and relationships with dominant shareholders. Moreover, this code suggested that companies should disclose information regarding the subcommittees that were formed to assist the board in fulfilling its duties; additionally, companies should release materials concerning the duties and composition of these committees (Commission on Corporate Governance, 1998). Due to demand for the development of governance guidelines that aligned with European and international recommendations, the Banking, Finance and Insurance Commission, Euronext Brussels and the Federation of Belgian Enterprises formed a committee—the ‘Belgian Corporate Governance Committee’—to accomplish this task. The committee developed a new version of the code, titled the Belgian Corporate Governance Code, which was published in 2004. As with other issued codes, these guidelines were flexible and applied a voluntary compliance approach. This updated code outlined nine main principles and included recommendations on the adoption of clear governance structures, the function and responsibility of the corporate board, the formation of specialised committees and the disclosure of corporate governance practices (Belgian Corporate Governance Committee, 2004). Following the publication of this update, the Corporate Governance Committee received suggestions and comments from several individuals and institutions in light of the recent financial crisis; therefore, in 2009, the Committee published a new version of the code, entitled
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Institutional Investors and Corporate Environmental, Social, and Governance Policies: Evidence from Toxics Release Data

Institutional Investors and Corporate Environmental, Social, and Governance Policies: Evidence from Toxics Release Data

2 Using facility-level data affords us three additional advantages. First, the facility is where pollution is generated. Thus, using facility-level data permits us to more directly test the delegated philanthropy theory that Bénabou and Tirole (2010) propose to explain the rationales behind the ESG movement. Specifically, one important argument “for asking corporations to behave prosocially is that the desired actions are often not about transferring income to less-favoured populations, but about refraining from specific behaviours, such as polluting the environment” (Bénabou and Tirole, 2010, pages 10-11). Second, facilities exercise significant decision power over their environmental management, including toxic release (Stephan, Kraft, and Abel, 2005), leading to heterogeneous pollution abatement practices across facilities within the same firm. 2 Thus, using facility-level data enables us to more precisely proxy for the intensity of institutional investors’ influence by using their physical distance from the facility. Lastly, as investment decisions are made at the sector and firm levels, using facility-level data mitigates endogeneity concerns. To more purposefully address our research question—whether institutional investors influence facility toxic release—we develop a local influence hypothesis based on the delegated philanthropy theory and the transaction-costs arguments (Coase, 1937 and 1960). The delegated philanthropy theory argues that as alternative responses to market and government failures, firms act prosocially at the demand of their heterogeneous stakeholders (e.g., investors, customers, and employees) because firms incur lower information and transaction costs in doing philanthropy than individuals doing these activities on their own. Drawing from this theory, the local influence hypothesis argues that heterogeneous preferences for facility pollution exist between local and distant institutional investors. Specifically, local institutional investors have a greater incentive than their distant counterparts to pressure facilities to reduce pollution because the former internalize, to a greater degree, the harm of pollution due to emissions of nearby facilities as well as the benefit of social prestige from acting prosocially in a local community. The transaction-costs arguments hold that when markets are inefficient, efficient economic transactions can still take place when transaction
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The Research of China Capital Market Institutional Investors Function Absence ProblemLijun Zhang

The Research of China Capital Market Institutional Investors Function Absence ProblemLijun Zhang

In China's securities market, the institutional investors have significant information advantage and scale advantages, and through diversified investment strategy can reduce investment risk. However, due to information asymmetry leads to the principal - agent problem occurs, institutional investors, fund managers are often not seek to maximize the interests of investors, but to consider their own management fee income and maximize their professional reputation. This leads to a conflict of interest proxy investment patterns. The principal - agent problem exists makes the investment behavior of fund managers and investors often target inconsistent, prone to "Rat", "shady fund" and other vicious incidents harm the interests of investors, investment, resulting in functional institutional investors the absence, but also reduces the efficiency of the market, undermining the stable operation of the financial markets. At the same time, there is also the problem of information asymmetry between institutional investors and companies. Under normal circumstances, participate in corporate governance, explore the value of social responsibility is an institutional investor. However, due to the existence of information asymmetry, corporate management is not to shareholders (including institutional investors) to maximize the benefits for their own business objectives, but to consider to maximize their own interests between corporate management and institutional investors. Thus, the management of behavior often harm the interests of institutional investors. Because of this, institutional investors know that as a result of information asymmetry in the case of damage to their own interests, the will not be actively involved in corporate governance, explore the value, but make short-term investments. Therefore, in this case, the company's development is very unstable, and not conducive to long-term development.
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