| Higher education has got a rapid development in China recent years. In order to achieve the aim of popularization of higher education, most colleges and universities increased enrollment, which had aggravated the shortage of funds for operation and brought a "bottleneck" for further development of higher education. Since national financial revenue funding and tuition fees could merely maintain their normal operating, it seemed quite obviously inevitable to solve the problem of fund shortage via bank-university cooperation. However, this approach itself contains a great risk of liability which has been emerging and seriously affected the normal operations of colleges and universities, resulting in a serious impediment to the stable development of higher education.In this paper, the new institutional economics theory was highly employed in analyzing the causes and risk of university liability from the system level. It was argued that the excessive liabilities were caused by the principal-agent problems between colleges and the government; unclear property rights served as the key reason for problems such as poor autonomy of the university, weak awareness of risk, inefficiency operation, high transaction costs, serious waste; and the lack of effective institution for enacting industrialized operation in colleges dragged their feet in profit-making and value-added activities; these factors made for the causes of colleges'liability risks to which the corresponding solutions included: (a) to perfect the principal-agent relationship between colleges and governments, (b) to establish modernized corporative property rights system characterized by diversified equity and clarity of property rights in colleges; and(c) to conduct institutional change to support and ensure effective value-added activities in colleges so that they can increase their capability of making necessary profit to avoid the risk of liability.
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