Institutional Investors and Management Incentives: the Empirical Evidence from Chinese A-Share

According to the date from the listed companies on China's A stock market for the period 2006-2009, we examined wether there was a relationship between institutional investors and executive incentives of listed companies. Our empirical study found that in China, institutional ownership concentration was positively related to the level of executive compensation and negatively related to executive shareholdings proportion. These results suggest that the institutional investors do not serve a monitoring role in mitigating the agency problem between shareholders and managers; they do not restrict the level of executive compensation, and just depress executive shareholding proportion to some degree. Institutional investors do not improve the merchanism of executive incentives.