Institutional investors, controlling shareholders and corporate activities : evidence from China

Institutional investors have been evolving significantly in China since 1997 when they were formally introduced to China’s market. The influence of institutional investors on firm policies has been studied extensively (Hartzell and Starks, 2003; Koh, 2007; Yuan et al., 2008; Crane et al., 2016; Firth et al., 2016; Dyck et al., 2019). These studies mainly focus on the level of ownership by institutional investors, however they do not consider the influence of the controlling shareholders. In China’s firms, ownership is highly concentrated, and the controlling shareholders usually dominate the decision-making in firm policies. Therefore, the behaviours of institutional investors could be influenced by the controlling shareholders and could be related to their ability to compete with the controlling shareholders. This thesis examines the influence of large controlling shareholders on institutional investor behaviour and addresses the question: In China, what is the effect that institutional investors have on firm policies in the presence of the large controlling shareholders?