Qualified foreign institutional investor shareholdings and corporate operating performance

Abstract

In this article, profitability, asset quality, debt risk, and sales growth are used as measurement indices of corporate operating performance. On the basis of panel data of 630 companies for 2008-2014, which is after the completion of China's split-share structure reform, an entity fixed-effects model is used to study the effect of qualified foreign institutional investor (QFII) shareholdings on the operating performance of Chinese non-financial transnational corporations. The results show that the QFII shareholdings ratio and shareholdings checks and balances degree are significantly positively correlated with return on equity and total assets turnover, but they have no significant correlation with asset liability ratio and sales growth rate. The evidence therefore suggests that the higher the QFII shareholdings ratio is, the higher the enthusiasm is for QFII shares participating in corporate governance, and the better the general corporate operating performance. The findings provide an important reference for Chinese transnational corporations to introduce QFII shares to improve governance structure and corporate operating performance.