Open Journal of Social Sciences, 2015, 3, 225-233
Published Online November 2015 in SciRes. http://www.scirp.org/journal/jss
http://dx.doi.org/10.4236/jss.2015.311027
How to cite this paper: Xu, W.T., Wu, J.L. and Xie, K. (2015) The Impact of Fund’s Heavy Position on Company Performance.
Open Journal of Social Sciences, 3, 225-233. http://dx.doi.org/10.4236/jss.2015.311027
The Impact of Fund’s Heavy Position on
Company Performance
—Empirical Evidence of China’s Main Board from 2007 to 2014
Wentao Xu*, Junlin Wu, Kun Xie
College of Economics, Jinan University, Guangzhou, China
Received 15 October 2015; accepted 16 November 2015; published 19 November 2015
Copyright © 2015 by authors and Scientific Research Publishing Inc.
This work is licensed under the Creative Commons Attribution International License (CC BY).
http://creativecommons.org/licenses/by/4.0/
Abstract
In China, developing institutional investor, especially securities investment fund, becomes more
and more important. In order to improve the level of company governance by bringing in institu-
tional investor, China Securities Regulatory Commission supports the development of institutional
investor by legislat ion and other polices. Pape rs about the relationship between fund holding and
company performance are still not enough and a lot of researches don’t consider the effect of some
moderator variables. This article mainly researched for the influence of shares heavily held by
fund on the performance of company, using data of A-share listed companies in Shanghai and
Shenzhen during 2007 to 2014. It also introduced two moderator variables to discuss whether
there existed effects on company performance if the fund was the second largest shareholder or
the holding company was state-owned. Actually, the empirical result showed that, the percentage
of stocks held by fund had a positive relationship with company performance. If the fund was the
second largest shareholder, it would strengthen the relationship between fund heavily holding
stock and corporate performance. If the company whose stocks were held by fund was state-
owned, the influence on company performance would weaken.
Keywords
Fund’s Heavy Position, Panel Data, Company Performance
1. Introduction
The issue o f “the La w o f Ch in ese Se cur it y I n ves tment F u nd ” in 2004 has set a standard for regulating the opera-
*
Corresponding author.

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226
tion of the fund ind ustry. After this, with the support of a variety of policies, the China’s fund ind ustr y de velo ps
at a stead y speed. It is well known that securities investment f und, on be half of i nstitutional i nvestors, plays a n
important role on helping the development of institutions, promoting the management of listed companies and
other aspects. Throug h heavil y holding shar es of listed c ompanies, fund ma kes itself an important sha re holder of
liste d co mpan y. As an i mpor ta nt exte rna l ma nage r, f und ca n ha ve si gni fica nt i mpac t on t he go ver nanc e of l isted
company. Jinguan Yang et al. [1] deemed that fund held the shares of listed companies in order to obtain in-
vest ment r etur ns a nd the fund ’s income was largely derived from capital gains. Since the operation performance
of holding co mpanies would a ffect its stock price in the market (Daniel [2]; Dai Xiaoj uan [3]), thereby affected
the fund’s investment returns. With the stocks held by the fund increasing, the stocks’ liquidity is reduced. In
order to ensure that the fund could get significant benefits before the exit of listed companies, the fund has a
strong incenti ve to participa te in the governa nce of listed companies. In t he case of inabi lity to quickl y exit, t he
fund would gradually change the passive shareholder strategy in the past. Jinyan Shi [ 4] thought that, on the
other hand, it would alter to the identity of important external governance, actively involved in the internal go-
vernance of listed companies, and focused on corporate performance and long-term value, which would affect
the performance of listed companies. In recent years, the researches about institutional ownership affecting the
performance of company have been the academic focus. Thus, how the fund holding affects corporate perfor-
mance?
Based on the China’s A-share market, we firstly studied the impact of fund shareholding ratio and fu n d’s
heavy position on the performance of listed companies. Secondly, we explored how the fund affected the com-
pany performance whe n it wa s the second largest shareholder of the company. Finall y, we stud ied when the fund
holding company was state-owned, how the impact of fund’s heavy p osition on the company performance
would change.
2. The Literature Review and Research Hypothesis
The curre nt studie s ab out t he in fluence s o f fund holding on corporate performance are mainl y expa nded around
the effects of inst itutiona l investo rs’ ownership on corporate performance.
Jensen [5 ] thought institut ional investors may supervise the management o f listed companies, and potentiall y
control the company governance issues. With the stake increasing, their motivations to monitor the company
governance and ma nage me nt be havio rs b eco me more intense. Demsetz et al [6] believed that co mpared with in-
dividual in vestors, i nstit utiona l investo r o wned more shares of listed companies. In order to obtain more holding
incomes, the motivation of its regulatory to listed companies would be stronger; at the same time, institutional
investor had greater voting rights, which guaranteed the power of their participation in corporate governance.
Thr o ugh re se ar ch in g, the aut h or s fo und t ha t the i n stitutio na l inve s to r shareholding proportion had a si gni fi cantl y
positive impact on company performance. Moreover, Smith [7] found t hat maintaining the independence of the
external institutional go vernance could improve internal governance, Helwege et al. [8] considered that institu-
tional investor through active participating in corporate governance, continuously improved the company go-
vernance structure and optimized the equity structure of the company, thus to improve company performance.
Gillan and Starks [9] found that institutional investors had been major shareholders of most US companies. In-
stitutional investors had become active participation in corporate governance and could have an effective over-
sight of the company management.
From the domestic point of researches, Weian Li a nd B in Li [10] through e mpir ic al me t ho d found that insti tu-
tional investo r effectivel y enha nced the level of corporate governance, and reduced agency costs of listed com-
panies. Institutional investor shareholding had a significantly positive correlation with corporate performance
and market value. Haifeng Fan et al. [11] from the heterogeneity point of institutional investor found that in-
creasing the fund shareholdi ng ratio would facilitate fund’s monitoring to li sted companies, thus increasing t he
market value of listed companies. Zhonghai Li and Dixin Zhang [12] thought that, especially for securities in-
vest ment f und , the re wa s a positive co rrelatio n between t he pr oportion of the fund holding and the company op-
erating performance. The higher the stake was, the better the holding company operating performance would be.
Jinyan Shi et al. [13] using 2005-2011 mainboard listed companies as the study sample, through the empirical
analysis of the panel data, with the increasing proportion of the fund shareholding, the fund ’s po wer of involving
in corporate governance and supervising of the largest shareholder would continue to enhance, thus improved
corporate governance, and improved corporate performance. Xianzhi Zhang, Xingfei Jia [14] used empirical

W. T. Xu et al.
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anal ysi s t o fi nd that di ffe rent owners hi p sta ke and t i me r a ng e o f so c ia l sec ur it y f und ha d impa c ts o n t he value of
listed companies. The empirical results showed that increased stake would significantly improve the company
value. T he lo nger t he ho ld in g pe r io d was, t he hi gher c o mpa n y va l ue i ncr ea se d. T he sa me wit h t he ho ld in g stake.
What’s more , the so cial sec urit y fund ho ldin g in gener al could play a positive ro le in strengthening sup ervisi on,
weakening the agency problem, etc., thereby enhancing the value of listed companies. Weimin Xie [15] used
2005-2011 mainboard listed companies as the research samp l e, and found that share proportion held by social
secur ity f und had a positive effect on company perfor mance after controlling other variables’ i nfl uence s. Yaj ing
Huang and Yueming Zeng’s [16] study showed that China’s institutional investor holding did play a positive
role on the performance of listed companies. High share proportion held by fund was expected to improve cor-
porate performance. While, low share proportion held by securities co mpanies, QFII, insurance fund, social se-
curity fund and trust compani es did no t have significant influences on enterprise performance.
Based on the above analysis, we can find that, along with an increase in fund shareholdin g ratio, the motiva-
tion and ab ility of fund to participate in company governance are also growing. This power can play an impor-
tant role in the co mpany i ncentive and supervisio n, and a lso de cisio n maki n g. Whe n t he fu nd shar eholding ratio
reaches a certain percentage, earnings through participation in corporate governance outweigh the cost of their
participation in corporate governance generated, which further promotes the fund companies to participate in
corporate governance, thereby enhancing the company performance level. Especially when the proportion of
fund holding is more than 10%, it is possible to send a director to play a more important role in improving cor-
porate governance. When s hare proportion held by fund is more than 10%, this article would define it as fund’s
heavy position. This paper will inve sti gate the e ffec t of the fund ’s heavy position on the company performance,
we raised the proposed hypothesis 1:
Hypothesis 1: fund holding proportion has a significantly positive correlation with corporate performance,
and so does fund’s heavy position.
Because of the special China’s background, the shareholding ratio of the largest shareholder generally occu-
pies too high. T he d o minant sha reho ld er us uall y tend s to occ up y the inte res ts o f mi nori ty sha re hold ers , whic h is
not conducive to improve corporate performance. Check-and-balance ownership structure can help improve the
level of corporate governance. Yuanpei Lin and Wen Chen [17] selected the listed companies in growth enter-
prise market as sample, they found that the share proportion held by the first largest shareholder had a signifi-
cantl y ne gati ve re lati o nship wi th company performance through empirical anal ysis. Jianxin Tang et al. [18] em-
ployed non-financial companies from 2003 to 2010 in China as the sample and analyzed whethe r equit y owner-
ship structure and the characteristics of board wer e co nducive t o tunnelin g. These results indicated that the first
largest shareholder tunneled the listed company by acquiring equity control, which was harmful to company
performance. Check-and-balance ownership structure could inhibit this tunneling behavior. Deping Chen and
Yongsheng Chen [19] found that a high degree of shareholder balance in the company would prove to have a
higher operating performance. Normally, the second largest shareholder holding ratio is higher tha n the sum o f
ratio of third to the fifth shareholders. And therefore to balance the first largest shareholder, it will need the
second largest shareholder or the cooperation of other shareholders and the second largest shareholder. Fund as
one of institutional in ves to r s, has t he a dvanta ge o f la rge scale funding, professional quality and other advantages.
If the fund is the second largest shareholder of the company, the fund will actively involve in corporate gover-
nance, effectively supervise the first la rgest share holder, and play professional advantages, thus improve corpo-
rate performance. So we put forward the hypothesis 2:
Hypothesis 2: The fund as the second largest shareholder will improve the listed company performance and
will strengthen the positive impact the fund’s heavy position will have on company performance.
Most of our country’s listed companies are converted from state-owned enterprise s. The ulti mate control i s in
the ha nds of the govern ment, so the state-owned enterprises will take some non-economic tasks. Their goals are
often influenced by political and social factors. While the government departments, in order to safeguard their
own interests, would adop t some administrative inter vention to state-owned companies, which is not conducive
for the fund to play a role in corporate governance. Xinmin Dai et al. [20] used the date of state-owned listed
compa nies of Chi na’s manufacturing industry from 2006-2011 as sample, they found that there existed negative
relationship between the property of state-owned companies and companies performance. Hanjun Li et al. [21]
empirically examined the relationship between the state-owned enterprises ownership structure and corporate
performance from 2007 to 2012. The results indicated the implementation of equity diversification of state-
owned enterprises, especially the institutional investors, could improve corporate governance structure to pro-

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mote its performance. Xing Liu and Xianchong Wu [22] found that the nature of state-owned had a negative
impact on the f und’s effective of improving the company performance. Accordingly, the proposed hypothesis 3:
Hypothesis 3: When the listed company is state-owned, its performance is lower than the non-state-owned
hold ing compa ny. And thi s nature will we aken the posit ive impa ct the fund ’s heav y posi tion will ha ve o n co m-
pany performance.
3. Research Design
3.1. Sample Treatment
The study sample in this paper is selected from listed co mpany in Shanghai and She nz hen Sto c k Exchan ge from
2007 to 2014. The data for dependent variables, independent variables and control variables is selected from
Wind Financial Database. Corresponding financial data is from the CSMAR financial analysis index database.
In this paper, primary sample is processed according to the following procedures: (1) Excluding financial and
insurance companies. (2) Excluding ST, PT companies. (3) Excluding insolvency companies or related data in-
complete companies. After the above dispositions, a total of 11,805 samples obtained.
3.2. Variable Description
Table 1 sho ws the type, name, symbol and measure method of variables.
3.3. Model Specification
To test whether hypotheses 1 and 2 is established, we set current return rates of total assets ROA as the depen-
dent variable, t he last period fund holdin g ratio HP a s explanator y variables. At t he same time, we added some
appropriate control variables, and built the multiple r egre ssio n Equation (1) for authe ntic a ti o n. W he n H P r egr es-
sion coefficient is significantly positive, indicating that the higher the proportion of shares the fund holds, the
more powerful effect the fund has on improving corporate performance, which verifies the hypothesis 1. To fur-
ther test the hypothe sis 2, we introduced t wo dum my variables in the regressio n Equation (1) . One wa s whether
the fund was in a heavy position, and another was whether the second largest shareholder of the company was
fund. As the second largest shareholder has balance power to the first largest shareholder. If the fund is the
seco nd lar gest s hareho lder o f its ho ldi ng comp any, i t will stre ngthen t he i mpact o f the f und ’s heavy p ositi on on
improving company performance. For this reason, we introduced the interactio n term HH * FS and investigate d
the fund’s reg ulatory role as the second largest shareholder in its holding company. When β3, β4 are signi fic a nt l y
positive, hypothesis 2 was verified. In order to control the influence of the first largest shareholder of the com-
pany performance, we introduced the first largest share hold er hold ing ratio Fir_ Share as contro l variable into the
Table 1. Var iable description t able.
Variable type Variable name Variable symbol Variable measure method
Explained variab le Return on total assets ROA Company net pr o fit/average total assets
Tobin ’s q Tobinq Enterprise value/asset replacement cost
Explanatory variable The proporti on of s tocks held by fund. HP The number of stocks fund holds/company
total capital stock
Control variable
Whether fund heavily holds stocks HH If the ratio of stock the fund holds is greater
than 10%, then remark as 1, otherwise as 0.
Whether fund is the company second
largest shareholder FS If fund is the company second largest shareholder, recorded as 1, other wise to 0.
Whether the stock holding company
is state-own ed SO If t he stock holding company is state-owned, then remark as 1, otherwise as 0.
Company size lnSize Natural logarithm of total assets
Leverage ratio Lev Total debt/to tal as s e ts
The total numb er of the first largest
shareholder equity ratio Fir_Sha re The fir st la rgest shareholder’s stock holding amount/com pany total capital s tock

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model. At last, the pap er brought in annual dummy variables to control the impact of different years on corpo-
rate performance. Regressi o n mod e l (1) is as follow:
,0 1,1 2,1 3,4,1,5,
14
6, 7,,
8
*_
ititititit itit
ititki it
k
ROAHPHHFSHHFSFir share
lnSize LevYear
ββββ ββ
β ββε
−− −
=
=+ ++++
+ +++
∑
ROAi,t represents the company’s return on tota l asset in period t. HPi,t−1 represents in the t − 1 period, the share
pro portio n held by fund , takin g the hyst eretic nature o f the fund ’s heavy position to the improvement of corpo-
rate performance into consideration. So we introduce the lag one period variable. HHi,t−1*FSi,t represents the FSi,t
as the moderator variable introduced to model to study when the company’s second largest shareholder is the
fund, how the impact of the fund’s heavy position will have on the company performance.
To test the hypothesis 3, we added state-owned dummy variable in the regression model (2), and examined
the impact of the nature of state-owned on performance. Then we introduced an interaction term HH * SO, a nd
studied whether the property of state-owned would weaken the fund’s positive impact on corporate performance.
Regression model (2) is as follow:
,0 1,1 2,1 3,4,1,5,
14
6, 7,,
8
*_
ititititit itit
ititki it
k
ROAHPHHSOHHSOFir share
lnSize LevYear
ββββ ββ
β ββε
−− −
=
=+++++
+ +++
∑
Referring to existing classic literature research methods, the paper chose Tobin’s Q va lue ( Tobi nq) to r ep lace
the ROA to do robust test.
4. Hypothesis Test and the Regression Result Analysis
4.1. Descriptive Statistics
Table 2 divides samples into two categories according to whether the fund heavily holds co mpanies’ shar es a nd
lists the co nsequence o f variable s’ de scriptive statistics. In Table 2 we can find that the company performance is
better when its shares are heavily held by fund. Specifically, the mean of proxy variables of company perfor-
mance such as ROA, Tobinq are higher, they respectively reach 0.0744, 2.1449. As to the median of ROA, To-
binq when share s hea vil y he ld b y fund , and the numb ers are 0. 06 41, 1 .701 0. T hey ar e st ill highe r t han t he num-
bers of companies whose shares are not heavily held b y fund. We can find that t he standard deviations of ROA,
Tobinq are 0.0601, 1.333w3 when HH re marks as 1. They are lower than the numbers of companies when HH
remarks as 0, which shows that the companies’ operations are more stable when the fund heavily hold their
shares. T he HP ’s mean is 0.2672 when fund heavily hold companies’ sha re s, which i s hi g he r t ha n t he nu mbe r o f
HP’s mean whe n f und don ’t heavily hold co mpanie s’ shares, and the nu merical difference is big.
Table 2. The result of descriptive statistics.
HH ROA Tobinq HP FS SO Fir_ S hare lnS ize Lev
0
Min −1.393 0.6160 10−7 0 0 0.02197 14.1082 0.00789
Max 1.2016 69.8757 0.099996 1 1 0.8941 28.5031 13.63
Mea n 0.0336 1.8750 0.0252 0.0991 0.4790 0.3669 21.9404 0.4701
Median 0.0298 1.5 330 0.0132 0 0 0.3496 21.7695 0.4756
SD 0.0608 1.4309 0.0281 0.2988 0.4996 0.1570 1.26738 0.2864
1
Min −0.372 0.7863 0.1096 0 0 0.0362 19. 1145 0.00752
Max 0.4770 11.6085 0.8514 1 1 0.8855 28.1356 1.1512
Mea n 0.0744 2.1449 0.2672 0.3198 0.4409 0.3698 22.2534 0.4347
Median 0.0641 1.7 010 0.2232 0 0 0.3582 22.0665 0.4393
SD 0.0601 1.3333 0.1471 0.46645 0.4966 0.1548 1.26319 0.2063

W. T. Xu et al.
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4.2. The Correlation Test
Table 3 shows the correlation between the variables by using Spearman correlation test, which can judge
whether there is a serious multicollinearity problem between variables. It can be found from Table 3, fund
shareholding proportion is significantly positive correlation with performance indicators ROA, Tobinq, so the
hypothesis 1 is preliminaril y verified. The coefficient of FS (whethe r the fund is the second largest shareho lder
of the company) is positive, which means company performance will be improved when fund is company’s
second largest shareholder. The property of state-owned is signi ficantly negative co rrelation with corp orate per-
formance, which is consistent with the hypothesis 2, 3. The shareholding proportion of the first largest share-
holder is significantly negative correlation with corporate performance. And other control variables are signifi-
cantly correlated with corporate performance.
In the view of the correlation coefficients between the various explanatory variables, we can find that the cor-
relation coefficient between HH and HP is 0.52, which i s bigge st. T he correlation coefficients between the other
variables are less than 0.45, and the n umber s of VI F ar e all less tha n 1 0 thr oug h testi ng, s o this part can indicate
that above models don’t exist serio us multico llinea rit y pro ble ms. Also t he correlation between Tobinq and ROA
is significantl y p ositive, so this paper took robustness test by using Tobinq a s a substitute variable for ROA.
4.3. The Empirical Result Analysis
Thr ough usin g the unbal anc ed pa nel d ata fr o m 2007 to 2 014, the Tabl e 4 sho ws O LS regr e ssion r es ult b y usi ng
fixed effect model (Hausman Test rejected the null hypothesis that there was no systematic differences between
fixed effec t method and ran dom eff ect meth od, so this s tu dy used fix ed eff e ct model ). It c an be f ound from Table 4,
the coefficients of HP (fund shareholding proportion) in r egressio n resul t (1), (2), (3) are positive (0.129, 0.103,
0.104), and being significa nt at leve l 1%, whic h shows tha t the higher the propor tion of the fund shareholding ,
the more active the participati on of corpor ate governance is. Because the fund ’s earnings are correlated with the
stock price of holding company, and the stock price is affected by company governance. Thus, the fund will
have motivations to play an important role in supervising company go vernance, and the company performance
will be improved. These regression results confirm the hypothesis 1. The coefficients of HH (whether the fund
heavi ly hol d co mpanie s’ share) in regressio n result (2), (3) are significa ntly positive at le vel 1%. F und can gi ve
full play to the functions of their supervision when heavily holding companies’ shares. Because the fund can
send a director to the company, which can enhance company governance level.
The coefficient of FS in regression result (2) is positive, which is significant at level 1%. So we can know that
company performance will be improved if the company’s second largest shareholder is fund. Some reasons are
as follow, on the o ne hand , high s hareholding ratio gives the fund positivity to participate in co mpany manage-
ment. Fund can make go od use of talents and have more chance to improve company governance. On the ot her
hand, the fund can balance the power of the largest shareholder when being the second largest shareholder of the
Table 3 . Spearman correlati on test.
ROA Tobinq HP HH FS SO Fir_ Share lnSize Lev
ROA 1
Tobinq 0.31*** 1
HP 0.42*** 0.07*** 1
HH 0.37*** 0.12*** 0.52** 1
FS 0.19** 0.04*** 0.30** 0.27* 1
SO −0.11* −0.18*** −0.02 −0.0 4** −0.09 * 1
Fir_Sha re −0.21** −0.19 * −0.37 −0.06* −0.1 1* 0.21** 1
lnSize 0.07* 0.43* 0.21* 0.12** 0.06** 0.34** 0.24** 1
Lev −0.41** −0.37* −0.06* −0.07** 0.03* 0.28* 0.07*** 0.43*** 1
Note: *, ** and *** show that te st result is respecti vely significant at le vel 10%, 5%, 1%.

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Table 4. The regression results of model (1), (2).
(1) (2) (3) (4) (5)
ROA ROA ROA Tobinq Tobinq
HP 0.129*** 0.103*** 0.104*** 1.929*** 1.862***
(34.37) (17.15) (17.47) (14.34) (13.99)
HH 0.0110*** 0.0101*** 0.145*** 0.0995**
(5.90) (4.93) (3.49) (2.18)
FS 0.0135 *** 0.141***
(6.30) (2.95)
HHFS 0.0118*** 0.325***
(4.15) (5.14)
SO −0.00408*** −0.0560*
(−3.09) (−1.89)
HHSO −0.00216 −0.0149
(−0.98) (−0.30)
Fir_Sha re
−0.000284*** −0.000276*** −0.00 0306*** −0.000667 −0.00104
(−8.33) (−8.08) (−8.91) (−0.87) (−1.36)
lnSize 0.00357*** 0.00343*** 0.00406*** 0.512 0.516
(7.80) (7.49) (8.50) (47.89) (46.49)
Lev
−0.0888*** −0.0879*** −0.0875 *** −0.941*** −0.921***
(−42.20) (−41.86) (−41.47) (−17.02) (−16.60)
Year control control control control control
Constant
−0.0151 −0.0139 −0.0257*** 12.61*** 12.71***
(−1.60) (−1.47) (−2.62) (58.12) (56.44)
Note: *, ** and *** show that r egression result is respectively significant at level 10 %, 5%, 1%; T statistics are sh own in brackets.
company, which can cease the condition that a dominant controls the company and can inhibit the first largest
shareholder’s tunneling behavior. Therefore, the company performance will be improved. From the point of in-
teraction item HHFS, the coefficient is significantly positive at level 1%, which shows that the promotional ef-
fect of fund ’s heavy positio n will be bette r when the fund is the second largest shareholder of the company. The
above results confirm the hypo t hesis 2.
The coefficient of SO (whether the companies are controlled by government) in r egr es s io n re sult (3) is si gni f-
icantly negative at level 1%, which shows that non-sta te-owned enterprises have better performance than
state-owned enterprises. Because non-state-owned enterprises are less affected by administrative intervention,
they can pursue the goal of maximizing business efficiency without government’s mandatory intervention and
need not consider too much social responsibility. So they can focus on improving company performance. While,
the state-owned corporate may assume some social goal and help government to realize some functions, and
maximizing company performance isn’t its main purpose, which is not good for company development. The
coefficient of interaction item HHSO in regression result (3) is significantly negative, which means that the
state-owned characteristic of listed companies may limit the fund’s role in corporate governance and weaken
pos itive impact of the fund ’s heavy position on corporate performance. The above results confirm the hypothesis
3. From the point of other control variables, the coefficients of Fir_Share (the shareholding proportion of the

W. T. Xu et al.
232
first largest shareholder) in regression result (1), (2), (3) are all significantly negative, which shows that the
higher the proportion of shares held by the first largest shareholder, the worse performance of the companies is.
The first largest shareholder may not be well supervised and consider its o wn interests to o much, which will vi-
olate s mall sharehold ers’ interests, and having bad impact on the operation of whole company. The coefficients
of lnSize (the natural logarithm of the company size) i n regression result (1), (2), (3) are all significantly positive,
which means the larger the scale of company is, the better the performance of company will be. The company
will pay more attention to governance when company size is large. The company will improve company per-
formance by exploiting scale economies effect and enhancing the market share. The coefficients of Lev (leve-
rage ratio) in re gression result (1), (2), (3) are all significantly negative. This part sho ws that the higher the le-
verage ratio is, the worse performance of the company will be. This is because company will ensure a lot of in-
terest when borrowing much money. At the same time, the company will face the risk of capital chain rupture,
which will lead the company to bankruptcy. Thus, the company may fac e a lot of bondage and do harm to the
company operation.
In order to get more reliable conclusions, this paper took robustness test by using Tobinq as an indicator to
measure the performance of the company. The regression results are showed in Table 4, we can find that the
coefficient s of HP, HH, FS, HHFS are all significantly positive and the coefficient of SO is significantly nega-
tive a t level 5% in regression resul t (4), (5). The co efficient of HHSO is negative, but not significant. R egression
results are similar to the above researches, which shows that the models are robust.
5. Conclusions and Suggestions
This stud y used the S hangha i and She nzhe n’s A-share listed companies from 2007 to 2014 as the research sam-
ple. Firstl y, it researched whether the stocks proportion held by fund influenced the company performance. Se-
condly, it showed that how the condition would impact the company performance if the fund was the second
largest shareholder. Third ly, it analyzed that how the condition would impact the company performance if the
company was state-owned. Through empirical test, this paper confirmed the hypothesis 1, 2, 3 and had the fol-
lowing conclusions: 1) the stocks proportion held by fund had a significantly positive influence on corporate
performance. Because the more proportion the fund company holds, the much more actively the fund will par-
ticipate in holding company governance, which will gradually promote the company performance by supervis-
ing company operation; 2) fund as the second largest shareholders would improve the holding company p erfor-
mance, and woul d s tr en gt he n t he p o sit i ve r el at ions hip b et w ee n fu nd ’s heavy position and company performance.
When the fund as the second largest shareholder of listed companies, the fund can effectively balance the first
largest shareholder’s rights and help the company to make better decisions, so the condition can improve com-
pany performance; 3) the state-owned property would have a significantly negative effect on corporate perfor-
mance, and would weaken the positive relationship between fund’s heavy position and company performance.
When the actual controller of the company is government, the government will take account of political and so-
cial purposes and may intervene in the company governance. And this case will reduce company performance
level.
In view of the a bove research conc lusions, this study rai s es f ollowing s ugge stions: First of all, the go ver n me nt
of China should take effort to develop securities investment fund and other institutional investors. And China
Securities Regulatory Commission can help form a diversified, multi-level professional investment team. Se-
condly, listed companies should actively introduce fund investors and properly increase the proportion of stocks
held by fund. As the fu nd c ompa n y has t he a dvanta ge o f professional talents, listed companies should encourage
fund investor to participate in company governance. Thirdly, government should further strengthen the reform
of state-owned enterprises and gradually reduce the proportion of state-owned shares. As the actual controller of
state-owned enterprises, the government should reduce administrative intervention in the listed companies and
actively encourage fund investors to participate in the governance activities of listed compa nies.
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