Institutional Investors' Shareholding and Equity Cost-Empirical Evidence from Chinese Security Market

Corporate equity cost can represent the level of corporate proxy cost efficiently. The paper studied the impact of institutional investor shareholding on corporate governance by equity cost. The empirical result verifies that when controlling corporate size, there is a highly notable negative relation between institutional investors' shareholding and corporate systematic risk, institutional investors' shareholding and corporate equity cost, thus verifies that as institutional investors have advantage in size, information and personnel, they can monitor corporate efficiently, thus decrease proxy cost, corporate systematic risk and equity cost.