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| Common Institutional Ownership and Corporate Digital Transformation: Collaborative Governance or Self-Interest Collusion? |
| Wang Xinguang,Sheng Yuhua |
| (School of Business, Nanjing Normal University, Nanjing 210023, China) |
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Abstract Common institutional ownership is becoming a widespread phenomenon in global capital markets. Then what impact has common institutional ownership had on micro-economic agents in the capital markets? There are two conflicting views in existing research on the role of common institutional ownership in the capital markets. From a positive perspective, common institutional ownership can cushion firms from particular shocks and enrich the channel of resources for their development. Scholars with a negative view argue that in an oligopoly model, common institutional ownership raises prices and reduces consumer surplus even in cases of insufficient control, and this theory is supported by evidence in the U.S. airline industry. #br#The digital economy is fast-growing in China, then what role does common institutional ownership play in the digital transformation of enterprises? On the one hand, capital is profit-seeking, and common institutional investors may, in order to maximize the value of portfolio investments, act against the trend to avoid the potential risks that may be brought about by the digital transformation of enterprises under the loss aversion decision-making mechanism, and implement collusion with managers through monopolies and other means; on the other hand, common institutional investors, with their ownership advantages, can better assist the development have easier access to resources, promote their digital transformation,and play the positive role as factors of production. Unlike the studies on common institutional ownership based on the more developed capital market background, this paper explores what impact common institutional ownership has on the digital transformation of enterprises, and what its impact mechanism and boundary conditions are, especially in the context of the current rapid growth of common institutional ownership in China, as the Chinese digital economy shifts to a new stage of deepening application, standardized development, and inclusive sharing. Considering that the economic consequences of common institutional ownership are still controversial in existing studies, this paper makes logical deductions from the two competing scenarios of collaborative governance and private-interest collusion, respectively.#br#Drawing on the data of Chinese A-share listed enterprises in Shanghai and Shenzhen from 2008 to 2020, this paper confirms that common institutional ownership plays an active role in capital as a factor of production, realizes the promotion of corporate digital transformation through the dual role of supervisory governance and synergistic development, and plays the dual role of resource provider and effective supervisor in the capital market. The regression results remain significant after a series of robustness tests such as propensity score matching method analysis. Further mechanistic analysis verifies the supervisory and synergistic effects of common institutional ownership in driving corporate digital transformation, respectively, and the results indicate that common institutional ownership can drive corporate digital transformation by reducing agency costs and increasing corporate total factor productivity. The heterogeneity analysis from macro to micro levels shows that common institutional ownership is more effective in driving digital transformation in contexts with higher economic development, lower centrality of independent director networks and financial background of executives.#br#As a special informal system, common institutional ownership can take advantage of the comparative advantage of information resources, play the important role of capital as a factor of production, and exert a synergistic effect by enhancing total factor productivity, which can, to a certain extent, compensate for the lack of formal system and promote enterprises to comply with the development trend of digital economy and cope with the "cold start" dilemma of digital transformation. Therefore, government officials should optimize the capital market environment and provide a favorable investment climate for common institutional ownership, and in order to support the standardized and healthy development of capital,the officials should insist on preventing the disorderly expansion of capital and maintaining fair competition in the market. Although the results of this paper show the positive role played by common institutional ownership in the capital market, government departments should be alert to the possibility that common institutional ownership may use its ownership advantage to exert external pressure on shareholding companies and bring corporate collusion, thereby undermining the level-playing field of the market. Strengthening anti-monopoly and promoting the implementation of fair competition policy is an inherent requirement for improving the socialist market economy system. Therefore,the governmental should insist on both regulation and promotion of development with a focus on common institutional ownership.#br#
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Received: 21 September 2022
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