Browsing by Author "Zhang, Qiaowen"

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    Corporate governance, institutional investors and firm performance: A comparative study of South Africa and China
    (Stellenbosch : Stellenbosch University, 2016-12) Zhang, Qiaowen; Erasmus, Pierre; Stellenbosch University. Faculty of Economic and Management Sciences. Business Management.
    ENGLISH SUMMARY : As growing role players in corporate governance, institutional investors are regulated and guided by a series of rules, according to which they are required to address their fiduciary duty by protecting the interests of their clients as well as a diverse group of stakeholders. This study explores whether institutional investors comply with this fiduciary duty through an investigation of their prudent stockholding behaviour and their impact on improved corporate governance. The first empirical chapter assesses what types of firms institutional investors tend to invest in. The impact of institutional investors on corporate governance has been considered from both financial and non-financial perspectives in prior studies. The financial perspective includes institutional investors’ impact on financial performance and on corporate operations (earnings management in this study). These aspects are discussed in Chapters 3 and 4 respectively. The non-financial perspective is represented by the impact of institutional investors on corporate environmental, social and governance (ESG) performance, which is studied in Chapter 5. South Africa and China, two major emerging markets where institutional investors and corporate governance have experienced considerable development in recent years, were employed as cases for this study. The selected sample came from South African companies listed on the Johannesburg Stock Exchange (JSE), observed over the period 2010 to 2013, and Chinese companies listed on either the Shanghai Stock Exchange (SSE) or the Shenzhen Stock Exchange (SZSE), observed over the period 2008 to 2013. After taking account of endogeneity problems and by using pooled ordinary least squares (OLS), fixed effect (FE), two-stage least squares (2SLS) and system generalized method of moments (Sys-GMM) estimations, this study observed that similarities and differences co-exist in terms of institutional investors’ stockholding behaviour and their relationship with improved corporate governance between South Africa and China, between pressure-insensitive and pressure-sensitive institutional investors, and between passive and non-passive institutional investors. More specifically, it was found that institutional investors overall in both South Africa and China are not always prudent in terms of their stockholding behaviour; although institutional ownership was observed to have a significant relationship with improved corporate financial performance and earnings management alleviation, it was insignificantly associated with corporate ESG performance. Institutional investors are therefore considered more conventional than socially responsible, and seem unlikely to accept suboptimal financial performance to pursue ESG aims. It should be noted that institutional investors seem effective in promoting corporate governance disclosure in South Africa, but this phenomenon was not detected in China. By disaggregating institutional investors into specific types, this study found that pressure-insensitive institutional investors, compared to their pressure-sensitive counterparts, appear to be more effective in monitoring, with a resulting advancement in corporate financial performance. Additionally, passive institutional investors in both South Africa and China were noted to show less preference towards past financial performance when they select stocks; in China, however, they exhibit a stronger association with improved corporate financial performance after the investment relationship has been built than their non-passive peers.