We use the sample data of Shanghai and Shenzhen A share listed companies between 2001 and 2012, exploring institutional investor heterogeneitys effect on firm performance. Our findings show that institutional investors have a significant positive effect on the firm performance. We divide institutional investors into the stable institutional investor and the unstable institutional investor. A further analysis shows that the stable institutional investors have a more significant effect on firm performance than the unstable institutional investors. The findings show that institutional investors, especially the stable institutional investors, can effectively mitigate corporate agency conflicts by reducing the information asymmetry between stock shareholders and managers.