Abstract:
In this paper, we investigate the relationship between institutional investors and cost of capital. We find that: (1) The institutional investors can reduce the cost of capital of listed-firms, and the influence of long-term institutional investors is more significant; (2) For the firms of different ownership structure, the institutional investors have more effect on cost of capital for SOE than Non-SOE; (3) The mechanism that institutional investors can mitigate cost of capital is mainly reflected in corporate governance and information interpretation, and there also exist difference between SOE and Non-SOE. In general, institutional investors can reduce the cost of capital through the behavior of corporate governance or information disclosure. We provide new evidence for the role which institutional investors play in our capital market. Meanwhile, we suggest the regulators should concentrate the trading behavior of institutional investors.
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