Assessing the potential impact of institutional investors on corporate Dissertation

Assessing the potential impact of institutional investors on corporate governance in China - Dissertation Example .................................................................... p.10 Literature review ..................................................................... p.10 Conclusions ..................................................................... p.31 References ..................................................................... p.37 ABSTRACT Examples are given pertaining to the development and present situation of Western institutional investors. Also under discussion is the practice of Western/Anglo institutional investors towards an increasing participation in the corporate governance in a proactive way. The methods and procedures of institutional investors participation in corporate governance is described, with American and British examples – and how these institutions pertain to China. Analysis is given describing the development of the corporate culture that leads to a more active role in governance, and how the assumptions thereof have evolved over time. Both the p ositive and the negative of institutional investors on corporate governance are described, with respect to a term corporate interests. Challenges relating to foreign investments in China are described in this context. The current status of investors and the losses they have suffered due to transitional effects in the Chinese economy are extrapolated based upon a shifting legal and financial landscape as China modernizes its economy. Recommendations to alleviate these concerns are proposed. INTRODUCTION The advent of high finance and its utilization in the operations of Incorporated business organizations created a situation many decades ago in which it was recognized that owners and shareholders need not always see eye to eye. The directors that oversee functional operations over day-to-day matters do not always have the same vested interests as the shareholding owners of the corporation. The interests of operational control may not match the objectives of other individuals interest ed in a slow and steady growth of assets and equity. But the considerable benefits of ownership by way of investment have been recognized for nearly the entirety of the 20th century, thus investors by necessity must gain certain rights and privileges. The role of these investors is an evolving understanding that balances the nuances of organizational agility against long-term growth. Theories of corporate governance must be developed to define the responsibilities of investors and the degree to which they can influence operations without stressing corporate resources beyond their ability to perform. (Davis, 2002) Possible examples might include the director/executive officer, who may have founded the business wanting to maintain control possibly for sentimental reasons – the business might have been in his family for many years. Or, the business might be a valuable source of jobs for a particular local community. But the investors that can help a business rise to the world st age might feel that their interests are best served through mergers or takeovers that permit a favorable return on investments based upon various stock options and projected share values. Certain individuals may perceive a loss of livelihood, and thus oppose measures that will increase the profits of those that have injected vast amounts of capital to make the business what it is. Arbitration and compromise are necessities. OVERVIEW Over three decades institutional investors have superseded private individual shareholders in the world's most important capital