| dc.description.abstract | Institutional investors have played an important role in emerging markets given their rapid growth of economies. This dissertation accordingly investigates the effects of institutional investors on stock returns and firm values in Greater China. This dissertation contains two essays entitled “The role of institutions in price correction: Evidence from intraday noise trading in Taiwan” and “Ownership structure, market liquidity and firm performance: Evidence from Chinese listed companies”. The first essay investigates the role of institutional investors in the Taiwanese stock markets in resolving noise trading, which we defined as the deviation of a stock’s price from its fundamental value within a trading day. We use a sample of stocks traded on the Taiwan Stock Exchange that experienced extreme price movements characterizing by price limit hits between March 2003 and March 2007, and assess the noise trading component of the price movements. Our results show that noise trading in the Taiwanese stock markets is prevalent, and that a protracted correction process takes place. In contrast to the findings for US equity markets, we document a disruptive role of institutional investors as they appear to move the market away from equilibrium and slow the speed of correction following an overreaction. In the second essay, we investigate the effects of ownership structure and stock market liquidity on firm performance by using the constituent companies of CSI 300 index on the Shanghai Stock Exchange and Shenzhen Stock Exchange. By using firm-year panel data, we find evidence that firms with higher levels of stock market liquidity exhibit better performance. This result is robust to the inclusion of firm fixed effects, the use of alternative measures of market liquidity, the use of alternative measures of firm performance, and a control for outliers. Besides, we find significant positive and curvilinear relationships between firm performance and the fraction of shares owned by institutional investors even after controlling for firm fixed effects. The effect of state ownership on firm performance is ambiguous for the potential immature privatization program. Moreover, firm size and financial leverage are inversely associated with firm performance, suggesting that larger size or higher financial leverage may reduce firm value. | en_US |