The Study Of State-owned Enterprise Supervision System On The Basis Of Principle-agency Analysis

Enterprise is considered the mechanism of transaction costs saving and organic combination of a series of incomplete contracts. Participants of enterprise are economic men who have strong motivation to maximize their own utility and have information asymmetry with each other and are restricted by limited rationality at the same time, thus lead to opportunism tendency and behavior in a certain systematic environment. In modern enterprise system, corporate ownership is separated from managerial authority, and due to information asymmetry, incentives incompatibility, responsibility inequity and incomplete contracts and other factors, agent problems would arouse and lead to the risk of moral hazard. The core issue of enterprise system is to solve incentive problems and the matter of operator's selection, which have often been settled by means of distribution of the residual claim and residual control.Because of political and economic systematic characteristics, China's state-owned enterprises are different from the enterprises in market economic system in the origin logic, ownership structure and management structure. To meet the planned economy system, mitigate information asymmetry between enterprises'insiders and to prevent the risks operators may face, highly centralized planning control was preferred in state-owned enterprises'supervision from 1949 to when the reform and opening up policy announced. It has been well proved that this means of supervision led to long-term business low efficiency in addition to playing a certain positive role during the specific period of time.After the reform and opening up, decision-makers adopted plenty of measures including power decentralization and profit transfer, contracted management, establishing modern enterprise system to reform supervision and operation mode of state-owned enterprises, hoping to improve the operating efficiency of state-owned enterprises. Compared with the planned system, these reform measures enable businesses to get parts of residual control and residual claim and improve incentives of the management and staff to some extent. However, internal control and short-term behavior is still popular, low efficiency operation still exists at the same time because the functions of the government and enterprises mixed up, obscure operation guide and lack of long-term incentives, internal control were quite obvious in the state-owned enterprises and short-term behavior was serious , the state of low efficiency has not been fundamentally reversed. Based on past experiences, the 16th CPC National Congress confirmed setting up specific supervision agencies of state-owned enterprises, separating social management function and ownership function of the government, implementing new type of state-owned assets management system of unifying rights, obligations and responsibilities and integrating management of assets, personnel and other affairs. Accordingly, State-owned Assets Supervision and Administration Commission (SASAC) were set up at all levels and supervision of enterprises personnel, major business activities and management of state-owned assets was implemented. It is the most important systematic transformation during the reform and development of state-owned enterprise, and it is the important decision taken after the highest national authorities summed up historical experience and compared other related systems. Overall, it has material positive meanings compared with the former systems: the relative concentration of commission right increased the strength of ownership, relative uniform system of laws and regulations involved state-owned enterprises monitoring was established, principle-agent relationship between the nation and state-owned enterprises has been clarified, incentive and restrictive measures to operators were relatively standardized, the open and great amount of state assets loss has been under control to some extent, the profitability of state-owned assets embodied, the state-owned enterprises'economic influence and driving force has been strengthened.However, this type of system still has room for improvement because of the restriction of ideology, interest groups and knowledge and experience. From supervision side, efficiency difference and incentives incompatibility still exists because supervisor and operator are the same level agent with enterprise owned by the whole people. Especially the SASAC had no rewards and punishment system related to officials'operation performance for the constraints of its government institution character, and in turn officials had no legal approach to realize incentives compatibility and there was no system to ensure enough encouragement for officials to supervise enterprises. In addition, regulatory reform of state-owned enterprises is a mandatory system of government, involving power and interest structure adjustment and with the relevant interest groups' constraints, the SAC has not yet handle some of the major rights, investors'commitment was not complete, as a result, design objectives of system reform was affected.Subjectively, it is the SAC's too broad jurisdiction and the officials'bounded rationality and information asymmetry that made them incompetent of operator and supervision choice and the actual effect of work not reach the origin goal. From the point of economic men, officials may adopt opportunism behavior in supervision because there exists incentives insufficiency and centralized power of personnel, affairs and assets which endowed them residual control right.From the aspect of regulators, this system has not fundamentally changed the administrating mode which treat enterprise operators as government officials, the value of operators has not yet been admitted, the income and resources of operators and commitments of them didn't match, performance assess was formalistic as a whole, ownership could not inspire and restrict operators and operators had no steady prospect, no regulation to control normal hazard of operators. For the purpose of maximizing effectiveness, operators may also take opportunism in the game with officials. With supervision power further centralized and external supervision not in place, the costs and income of opportunism was asymmetry, rent setting and rent seeking were regarded as normal action of operation, opportunism of officials and operators might interact and thus made actual work deviate from the purpose of system arrangements.On the basis of theory analysis, this paper put forward that we should fully understand the great significance of the state-owned economy, emancipate the mind and seek truth from facts, break ideological restriction and existing pattern of interest, respect the legitimate economic appeal of supervision game participants, set up system which can realize the supervisor and supervisee's participation restriction, compatible incentives and restrain opportunism in accordance with the principle of giving priority to efficiency and eventually achieve the maximization of national wealth.This paper holds that research of the state-owned enterprise supervision and administration system should use the modern economic analysis framework and theoretical foundation, based on the interest of participants of enterprises supervision system and the system design needs of participants''participation restriction and compatible incentives, evaluate the gains and losses of supervision system and performance of state-owned enterprises operating. On the basis of the above analysis, this paper concludes the overall conclusions and corresponding policies and thus embodies the following aspects of innovation:In the framework of analysis, this paper is mainly based on analysis of the interest of micro individuals, highly unifies the structure, analysis and focus with the analysis model of principle-agency theory. In addition, this paper focus on the contrast of costs and income of participants with the constrain of system environment and stresses the balance and constraints of opportunistic tendencies and opportunism behavior with information asymmetry and limited rationality. Consequently, this paper has firm micro research base and realistic analysis and conclusion.On the research perspective, compared with former research which focused on the analysis of the operator's incentive effect, this paper pays more attention to the supervisor, including the analysis of SASAC and its officials'behavior. Additionally, this paper points out both the traditional and new regulatory system ignored and evaded the incentive optimization of the supervisors and holds that it is the main reason why supervision system didn't reach ideal goal. Further more, this paper carries out that only when officials get incentive compatibility could the origin goal of system design be practiced. As a result, system design should break the ideological constraints, consider the interests of government officials, realize the importance of reasonable incentive and associate the legitimate interests of the officials and the operating results of state-owned enterprises.Being a participant of current supervision system, the author experienced and understood both the supervisor and the supervisee side. Therefore, the author is quite familiar with the current system environment and arrangement, has direct and profound knowledge of the micro behavior of interest groups. Taking advantage of the above facts, this paper uses some mature theory and analysis tool such as the principal-agent theory and system change theory to making efforts to reach the height of theory. On the other hand, this paper attaches great importance to the analysis of the internal logic of supervision and pursues the result of integrating of theory and practice.In policy recommendations, this paper takes the sub-optimal choices and feasibility of system arrangement into first consideration on the basis of"emancipate the mind and seek the truth from facts". Based on the respect of participants'legitimate interests and in terms of information asymmetry release, participation restriction and compatible incentives should be formed, opportunism should be restrained, the character of state-owned assets supervision should be redefined (from government institution to commercial institute) and the supervision regime should shrink, origin of officials should be changed and incentive system to officials should be strengthened, corruption and laches should be punished. Meanwhile, legal entity administration structure of state-owned enterprises should be improved, reform of ownership system should be profoundly enhanced so that enterprises could be public listed, incentives and restriction of operators could be improved.With the limit of knowledge and mastery of basic theory, some parts still need further analysis and material is not perfectly collected. In addition, dynamic analysis and the model are not sufficiently complete, the deduce process is not rigor enough. Consequently, this paper might have flaws in some areas; breadth and depth are still inadequate.