Abstract: Different investment styles and share holding motives of heterogeneous institutional investors may lead to different demands and influences on accounting conservatism. Based on the analysis of the investment funds and QFII, which are the most representative ones of domestic and foreign institutional investors respectively, this paper tries to explore their influences on corporate governance, particularly the relationship between institutional holdings and accounting conservatism. The results suggest that fund holdings can significantly reduce the accounting conservatism of the listed companies. By contrast, QFII holdings can help to improve the level of corporate governance, so that the level of accounting conservatism from both individual governance and institutional interaction can be improved. This study has not only confirmed that the heterogeneous institutional investors have different effects on the corporate governance mechanism, but also provided the evidences of the involvement of QFII in corporate governance, and extended the understanding of the influence of inter-institutional interaction on corporate governance.

Key words: corporate governance; institutional investors; accounting conservatism