Research Into Corporate Governance Of Trust Company Based On Common Agency

In the current literature review of corporate governance, principal-agent theory as corporate governance theory mainly refers to the traditional bilateral principal-agent theory, that is the shareholders of the Company as a single principal entrust the operation right of the company to the manager, the manager as a single agent accepts it and operates their enterprises. This is the principal-agent relationship between shareholders and managers. However, the principal-agent theory is a dynamic evolution. The literature review of corporate governance based on expanded principal-agent theory doesn't almost exist. In economic reality, the relationship between principals and agents is complicated than the relationship described by the bilateral principal-agent theory. The research into corporate governance based on the traditional bilateral principal-agent theory may be incomplete or inaccurate.This thesis is intended to choose the trust company as a research object. For one thing, in the trust company, shareholders and trustors will independently entrust their property rights to the managers which will provide service to them. Shareholders and trustors which have different target interests, anisomerous cost, different property forms independently grant decision-making power the managers of the company. In the trust company shareholders and trustors as principals and managers as agents form common agency relationship. On the other hand the current domestic research directly exerts general corporate governance theory based on the traditional bilateral principal-agent theory into corporate governance of trust company without considering particularity of trust company. Analyzing principal-agent relationship of the trust company and establishing appropriate corporate governance of the trust company will have both theoretical and practical significance.This thesis describes the business behavior of the trust company. In the trust company shareholders and trustors as principals and managers as agents form common agency relationship. Because there exist interest conflict and information inconsistency between shareholders and managers, this brings agency problems and agency costs.Trustors and managers are also the same situation. agency costs of the trust company can be divided into three types, agency cost between shareholders and managers is called "the first-type agency cost"; agency cost between trustors and managers is called "the second-type agency cost"; agency cost between shareholders and trustors is called "the third-type agency cost". The first-type and second-type agency cost arise from and agents. The third-type agency cost originates from interest conflicts between principals.In Rajan and Zingales's critical resources theory of the firm, this thesis puts forward critical resources of the trust company which are own property and trust property. Based on common agency and critical resource arrangements of the trust company, this thesis puts forward the meaning of corporate governance of the trust company. Corporate governance of the trust company includes arrangements of the property rights, arrangements of trust relationship and governance mechanism based on them. Arrangements of the property rights and governance mechanism based on them constitute own property governance. Arrangements of the trust relationship and governance mechanism based on them constitute trust property governance. Corporate governance of the trust company includes own property governance and trust property governance.In common agency relationship of the trust company, shareholders and trustors will independently entrust their property rights to the managers. Under the circumstance, governance mechanism of own property and governance mechanism of trust property is independent of each other. Governance mechanism of own property resolves agency problems between shareholders and managers and reduces "the . first-type agency cost". Governance mechanism of trust property resolves agency problems between trustors and managers and reduces "the second-type agency cost". The designers of governance mechanism of own property are shareholders and the designers of governance mechanism of trust property are trustors. This thesis establishs governance mechanism of own property and trust property. This thesis establishs agency cost model between shareholders and managers and testifies the role of governance mechanism of own property to reduce "the first-type agency cost" under the assumption that there is no interest conflict between principals. This thesis also establishs agency cost model between trustors and managers and testifies the role of governance mechanism of trust property to reduce "the second-type agency cost" under the assumption that there is no interest conflict between principals.However, in common agency relationship of the trust company, there is interest conflict between principals. Any governance mechanism of own property and trust property don't effectively resolve interest conflict between principals. Based on common agency relationship of the trust company, this thesis designs integrated governance mechanism to resolve interest conflict between principals. Because of interest conflict between principals, trustors are aggrieved not only by managers to pursue their private interests but also by shareholders to pursue their own interests. Under the circumstance, total agency cost becomes larger. This thesis establishs agency cost model and testifies the role of integrated governance mechanism to resolve interest conflict between principals.This thesis studies corporate governance based on the theory of common agency In the framework of the theory of common agency, this thesis analyzes common agency problems and agency costs of the trust company. Based on them, this thesis puts forward the viewpoint that corporate governance of the trust company includes own property governance and trust property governance. The meaning of corporate governance of the trust company is totally different from the ordinary meaning and also different from practical arrangement .This will help us to have total awareness of corporate governance of the trust company and establish accurate corporate governance of the trust company.