This study investigates the influence of institutional investors on corporate performance in institutional environments having different degrees of government intervention using data from Chinese listed tourism companies for the years 2001 to 2011. The results show that the influence of institutional investors on listed tourism companies' performance depends on the degree of government intervention in the sector. It is therefore concluded that market-based tools may be effective in developed economies, but not in countries with transitional economies such as China. This is because the required market and operational environment are not available. Improved performance requires market reform to decrease government intervention in the business operations of listed tourism companies and to improve the effectiveness of institutional monitoring in their corporate governance.