A Study On Financial Governance Efficiency

Financial governance, the product of corporate finance and corporate governance, has double missions, is becoming the highlight of the practical and the academic field. The theory of the financial governance, which originated from the western theory and developed in our country, is advancing towards the theory of "financial rights flow". However the research is far from maturity, for example, the deep level fundamental research such as financial governance efficiency is extremely deficient. While the efficiency is the core of economics and management, and financial governance efficiency is the fundamental goal of financial governance. To some sense, without the deep study of the efficiency, it is impossible to have the financial governance theory really mature. Therefore, in order to deepen corporate financial governance issues, the question of efficiency is very significant, and can't be neglected. So it is the answer to the demand of "financial governance efficiency" study that forms the basic fundamental background and incentive of this text.In this paper, economics, management, law and other related theories are used comprehensively. "Contract theory" and "financial rights flow theory" are considered as the academic core, and systematic research is conducted through the bright line of financial governance environment, financial governance structure, financial governance mechanisms, as well as the dark line of "financial governance efficiency".It has six chapters. Chapter 1 is introduction. After a brief description of backgrounds, meanings of the topic and basic agreements, and a review of research results already on corporate governance, financial governance and the efficiency of both in and out. This chapter demonstrates the reseach framework and the main innovations. Chapter 2 is the theoretical bases of financial governance efficiency. After introducing the contract theory of the firm, the financial rights flow theory, the theory of incentive mechanisms and game theory, the logical relationship between theoretical bases above and financial governance efficiency is discussed. Chapter 3 is the logical framework of financial governance efficiency. Firstly, the content of "efficiency" is defined. Secondly, the theory of financial governance efficiency is put forward and proved. Last but not least, financial governance system is composed of financial governance environment, financial governance structure and financial governance mechanism, which constructs an interactive framework for releasing efficiency. Chapter 4, the research is going on the listed company's financial governance environment and governance efficiency. Financial governance environment is a cornerstone for the release of the efficiency of financial governance system. This chapter discusses the logical relationship between the government behavior, the legal system, the property rights protection, the level of the market, the credit system, the contract culture and the financial governance efficiency. Chapter 5 is about the listed company's financial governance structure and governance efficiency. In this part, "financial governance structure" is divided into two parts: the financial capital structure and the financial organization structure. As to the financial capital structure, the paper systematically expounds on the relationship between the capital structure, the ownership structure, the debt structure and the financial governance efficiency. As to financial organization structure, this paper deeply analyzes the logical relationship between the general meeting of shareholders (the controlling shareholder), the board, the supervisors, the managers and the financial governance efficiency. Chapter 6 is about the listed company's financial governance mechanism and governance efficiency. Financial governance mechanism is the engine of releasing efficiency of financial governance system. First of all, the relationship between the financial governance efficiency and the financial mechanism for making strategic decisions, financial mechanism for encouraging innovation, financial mechanism for checks and balances is discussed; meanwhile, the latter three constitute the core mechanisms of financial governance system. However, only the core mechanisms are unable to meet the demands. Thus, this paper constructs a jointly governance mechanism as a dynamic coordination mechanism in order to serve the three mechanisms mentioned above. Then, because of the need of information in the operation of various financial governance mechanisms and information asymmetry, it is also proposed the mechanism for the disclosure of financial information.The followings are the main innovations of the paper:1．This paper introduces and demonstrates "financial governance efficiency" firstly. Based on the enterprise contract theory, the author argues that the nature of the enterprise is a cooperated contracting form of material capital owners, human capital owners and social capital owners, whose benefits are bigger than costs. The essence of corporate contracts is property rights contracts, whose core is financial rights contracts. "Financial rights" is the academic core of financial rights contracts. Incomplete financial rights contracts and agency problems lead to the existence of financial governance problems. The essence of financial governance is residual financial rights allocation (residual financial claim rights and control rights). The fundamental objective is maximizing residual financial rights through financial governance environment, financial governance structure and financial governance mechanisms, consisting of an interactive framework for releasing efficiency in direction of residual financial rights allocation. The core of maximizing financial governance efficiency is matching residual financial claim rights with control rights, in other words, maximizing the efficiency of residual financial rights allocation. The measuring standard is the comparison between financial governance revenues and costs. Financial governance revenue is the total of financial governance entity's utility and common surplus. And the costs contain transaction costs of financial governance body, the first-type agency costs, the second-type agency costs, organization costs of governance structure, governance costs of market, compliance costs, governance costs of government, costs of institutional friction.2．The paper defines financial governance, financial governance entity and financial governance object clearly. It believes that financial governance is the systematic arrangement, which is on the basis of stakeholders governance dominated by shareholders, and through rational allocation of financial rights and coordination of financial conflicts to form a good interacting among financial governance structure, financial governance mechanism and financial governance environment aiming at achieving financial decision-making scientifically and maximizing financial governance efficiency . Financial governance entity can be understood from narrow and broad respectively. Narrowly, financial governance entity refers to the institutions, corporations and individuals, who have abilities of rational financial rights allocation and coordination of financial conflicts, scientific financial decision-making and maximizing financial governance efficiency, mainly including general meetings, board of supervisors, managers, shareholders, creditors and employees. While broadly, it includes customers, suppliers, government, community and so on, all of which are social capital providers. Financial governance object can also be understood in two ways. The broad financial governance object refers to "financial rights", and narrow one specifically refers to powers of "financial rights". Although "financial rights" include general financial rights and residual financial rights, powers include the same two, the core of broad financial governance object is residual financial rights and the narrow one is only the powers.3．The paper redefines and deepens the meanings of "financial mechanism" clearly. "Financial mechanism" refers to the process in which the subsystems as well as the elements are interconnected, mutually restrained, and its determined rules of the adjusting form, methods and means to the inherent nature of financial system. It includes the following meanings: (1) Financial mechanism is a dynamic man-made system which works automatically according to some certain rules and leads to a financial economic result; (2) Financial mechanism is not the end, nor the initial reason, it is the intermediary converting financial expectation into financial behavior, the reasons into results; (3) Financial mechanism constraints and determines the running of financial function. In certain financial system, financial mechanism exists objectively , it is a reflection of the inherent and essential mode of action and rule of financial, also it is the dynamic relationship of the interaction between elements in the system; (4) the goodness or badness of financial mechanism is evaluated by the strength or weakness of function resulted from the role which financial mechanism plays on financial system ; (5) Financial mechanism is mainly composed of financial decision-making mechanism, financial incentive mechanism and financial supervise mechanism, and in which decision-making mechanism is "steering wheel", incentive mechanism is the "engine", supervise mechanism is the "brake", they keep financial mechanical system running healthily.4．The paper constructs "integrated governance mechanism of stakeholders and contingent governance coordination mechanism" and decomposing the mechanism efficiency releasing. The core of financial governance efficiency is the symmetry of residual claim rights and residual financial control rights; integrated governance mechanism reflects cooperation among stakeholders in order to maximize the financial governance efficiency under norm station, while contingent governance coordination mechanism is a mechanism to promise a stable and continues cooperation among stakeholders facing a financial conflicts objectively under some special circumstances; integrated governance mechanism and contingent governance coordination mechanism is an effective protection for a possibly long-term cooperation among stakeholders under normal or abnormal state, and is the source for financial efficiency releasing.5．This paper builds a new efficiency-oriented financial governance system. It mainly includes the following means: (1) Financial environment is the foundation of governance, financial governance structure is the foundation and core, financial governance system is the engine, financial governance efficiency is the fundamental objective; (2) Financial governance environment, financial governance structure, financial governance mechanism and financial governance efficiency together constitute financial governance system, and they form a downstream relation in the financial governance system; (3) The financial governance environment, financial governance structure and financial governance mechanism all include efficiency releasing, and form a downstream relation, so it becomes a good interaction framework in which efficiency can release freely, and it is the source of financial governance efficiency; (4) The research on financial governance efficiency is the follow-up theoretical research in financial governance research, and it is the fundamental objective of financial governance, which works as the direction and the guidance.