Research On Principal-Agent Relationship Of Family Firm

In recent years, the family firms have developed rapidly and become more important in private economy in China. However, at the same time, the problem of hiring the career manager and principal-agent relationship become one of the main factors which baffle the development of family firm. The existence of asymmetric information and uncertainty make the principal can not comprehend the reliability, capacity and striving extent of the agent thoroughly, as well as whether the agent has cheated on him. The scholars have been looking for the methods to solve these principal-agent problems all the time. However, no perfect answer has been found.This essay uses the economic theory, case and compassion to analyze the principal-agent relationship and the incentive and disciplinary mechanism of Shansi Bank. Through the analysis, we found out that the separation of the right of management and property rights in Shansi Banks gives the agents enough credit and decision space which make it possible for them to exert their management capacity as much as possible. Meanwhile, its incentive mechanism specialized with the Labor stocks, and disciplinary mechanism, which specialized with collective punishment, make the firms bestir the agents effectively and restrict their agents from cheating with the lowest cost.Apart from this, this essay chooses the medieval Italian family firms, which are similar to Shansi Bank at the governance structure and principal-agent relationship, as the research target to find out its characteristic and details of its incentive and disciplinary mechanism. And then compare the late Italian family firms with Shansi Banks in details. Through the comparison, the author discovers that the two mentioned above have many traits in common. For example, they are both inclined to hire non-family members and locals as the agents and bestir the agents through releasing some residual claim right to them. At the same time, there are some discrepancies, such as the range of the agents who have the residual claim right in Shansi Banks is larger than that in late Italian family firms. And their different accounting systems also lead to different distributing systems and etc.There are two innovations in this essay:1. Analyze the history record. Shansi Bank came into being at the early time of 19^th Century and Medieval Italian family firms engendered at the beginning of 13^th Century. The history records about them are not so abundant and the related research is also not so affluent.2. Compare the Shansi Bank with late Medieval Italian family firm. Although they are in different continents and different ages, they are both large successful family firms in history and their operation and development depend on the consummate principal-agent relationship to large extent. Besides, their governance structure and principal-agent relationship are similar to each other's. So it is meaningful to do the comparison.