Research On Action Mechanism Of Interest Group In Financial Institution Reform

This paper researches on Chinese financial institution reform from the view of interest group. Interest group refers to the organized combo that have common interests or goals and influence other organizations or public sectors decision-making by collective action in a society or a specific reform. Interest group can abstracts into three elements:common interest, systematization and collective action. Common interest is the premise of interest group, which is the basis of aggregation. Systematization is the guarantee of interest group forming and existing, which combines individuals to an action group. Collective action is the effect mechanism of interest group, through which interest group expresses and achieves the common interests. However, the systematization degrees of interest groups are not all the same. Interest group could appear as a dominant organization form or a recessive one. Systematization degree could be divided into four levels: formal organization, contracted organization, informal organization without fixed organization structure or fixed name, including virtual organization existing in form of network, intentionally cryptomorphic organization, which mainly refers to criminal organization or organization intended to conceal its own interest.Interest group is an inevitable social and economic phenomenon, which appears after interest differentiation, conflict, collection and disintegration of interests groups. At present, Interest group has become a hot topic. Once unfairness appears or any reform encounters hindrance, the action of interest group is mentioned although it is hard to define. Interest group appears simultaneously in Politics, Sociology and Economics, which shows it is a complex social being. It’s necessary for social progress and economic development to study interest group from theoretical perspectives including investigating the rationality of its existence, analyzing its effect mechanism, evaluating its action and coordinating its development. Researching financial issues from interest group perspectives is kind of analysis method of Political Economics of Finance. Political Economics of Finance is a cross-discipline based on Finance, Political Economics, and Law. This theory jumps out the theoretical framework of standard finance, which provides a new angle for finance study by bringing factors like law, government and interest group into analysis. Interest group is not only one of the most important analysis perspectives, but also an important analysis unit of the research of financial decision and financial system reform.As a kind of exploratory transformation of theoretical research on Finance, Political Economics of Finance corresponds to the transformation of research paradigm earlier in Western Economics. Since the mid-late period of last century, there has been a trend called "New Political Economics of Finance" which refers to economics research overseas regresses to Political Economics. Hence the research of the mainstream Neoclassical Economics based on fixed system and became more technicalization, some economists began to study the effect of something like politic, ideology, system and culture on people’s economic behavior and formed New Institutional Economics, New Economic History, Property Rights Economics, Law and Economics, Political Economics of Regulation, Public Choice Theory, Constitutional Economics and so on, all of which constitute New Political Economics.One methodology and three kinds of research methods are used for analysis. The individualism methodology is insisted for research of interest group. Although interest group is a research object of group pattern, it’s believed that all the interests originate from individual need which constitutes group interest, and collective action is completed by the cooperation of different individuals. In research, the whole interest group is considered to be an individual, which is endowed with utility function and studied with its constraint condition as a decision unit. Besides this, three study methods are taken (1) The measure of cross-disciplinary research is used since Political Economics of Finance is a new cross-discipline financial discipline, and interest group is a concept appears simultaneously in many disciplines.(2) Positive method of mathematical logic. Two study methods of logical positivism, the game theory and the Optimal planning mathematical model, are taken to study action mechanism of interest group, which reflects the independent decision-making of a single individual and the gambling process among different interest groups.(3) Normative analysis. The effect and properties of the action of interest group is analyzed normatively to make an objective value judgment about interest group.Three parts are included in this paper (1) conception and literature review.(2) Theoretical analysis of the value of interest group’s action.(3) Evaluation of the action of interest group and countermeasures.The first part is theoretical review of interest group and theoretical basis of the action mechanism of the interest group. Chapter2is "theoretical review of interest group", which analyses based on the conception of interest and points that the formation of interest group is caused by the change of social interests relationship. This chapter reviews the theories of interest group from the angles of economics and politics, and summarizes the Chinese scholars’viewpoints of interest group. Chapter3is "analysis of the action mechanism of the interest group and reform of financial system", which provides theory basis for the analysis of the action mechanism of interest group in the reform of Chinese financial system and establishes the analysis framework as Political Economics of Finance. First, to provide "Chinese background" for analysis, this chapter begins with the analysis of interest groups and their characters in the reform of China and proposes that interest groups are needed as intermediate decision level in "Three-Component Society" which is composed by country, market and civil society. Second, based on the review of various interest expression mechanisms, interest expression mechanism are defined as institutional interest expression mechanism, organizational interest expression mechanism and action interest expression mechanism. To provide "technical preparation" for analysis, the analysis of action mechanism of interest group including Game Theory and Optimal Planning Mathematical Model is attached. Last, to provide "theory basis" for analysis, analytical method of political economics of finance is introduced by the reviews of the development of finance, and achievements of political economics of finance are introduced from the angles of laws, policies and informal institutions.The second part is the theoretical analysis of the action mechanism of interest group. Chapter4is "analysis of the action mechanism of interest group in the reform of Chinese securities market". This chapter begins with analysis of the characters, constraints and objective function of interest group based on Chinese securities market. Secondly, models for discussing the action mechanism of interest group are established based on the reform of system of IPO and SEO. The model based on the reform of SEO is a signaling game model between the interest group of listed companies (large shareholders) and the interest group of investors, whose signal is shares of SEO. Regulators act as the spokesmen of public interests by regulating return on asset and re-financing price. Chapter5is "analysis of the action mechanism of interest group in the reform of state-owned commercial banks". This chapter firstly reviews and evaluates the process of the reform of sate-owned commercial banks and, analyzes types and characters of interest groups in shareholding reform of state-owned commercial banks. Based on this, shareholding reform of state-owned commercial banks is analysis by using control contest model and political banks model. Control contest model is a game among three interest groups including domestic large shareholders, foreign strategic investors and domestic minority shareholders, whose equilibriums are judged by two effective criterions-value of bank and return of control. Political bankers model a two-stage game among three interest groups including large shareholders of state-owned commercial bank, political bankers (bankers with political aim) and foreign strategic investors. Principal-agent relationship exists between large shareholders and political bankers, political interests would balance incentive contracts (salary contracts) and hardworking of bankers. Political bankers and foreign strategic investors may be collusion because of political interest.The third part includes value analysis of the action of interest group and countermeasures. Chapter6is "coordination of interest groups and harmonious development of finance". This chapter firstly advances that the value of interest group should be judged by existence and action effect which is introduced by positive and negative comments about the action of interest group, and points that the existence of interest group is legitimate. Secondly, coordination mechanism of interest group is discussed and three kinds of coordination mechanism are proposed, the analysis of coordination between government and interest groups is the emphasis. Thirdly, the characters of the interest relationships of financial industry are analyzed based on the analysis of Chinese finance reform, which decides the financial industry emphasizes on the strong interest groups and ignores the weak interest groups. At last, the advices about coordinating interest groups to promote harmonious development of finance are proposed.