On Interior Governance Of Institutional Investors For Transactions Of International Financial Derivatives

Institutional investors are the main dealers in international financial derivatives transactions. The inner governance within the institutional investors is one of the governance mechanisms. Although ex-post maladjustment of institutional investors'governance and opportunism tendency of institutional investors as a individual has, the failure of third-party governance because of knowledge dispersion and the potential high-cost of third party governance leads the fact that institutional investors governance becomes quite essential.Institutional investors governance consists of interior governance and exterior governance, interior governance as the main. Interior governance of institutional investors governance contains compulsory stock-holding, rewards contract constraint of the manager, incentive fees, options contract, retiring fund plan, inner manager market building, independent director institution, institutions as stock-holders of other institutions and reasonable arrangement of property rights etc., interior control, reward incentive and reasonable property rights arrangement are the key factors of interior governance. high incentive and information advantage makes the interior governance as the prior alternative, the management resources and organizational knowledge existed in the institutional invertors makes it as a priority.The research on institutional investors governance focus on interests-coherence between individual managers and the institutional investors, the cultivation of the resources, knowledge and competence of the institutional investors. To avoid moral hazard through interior control, for it is insufficient and not well implemented. we assume that individual managers are loss- averse. We make the interests-coherence through reasonable management fee design, incentive fees and proper proportion of stock-share of managers as a individual investor and avoid taking excessive risks at the same time. But ultimately the development of institutional investors depends on the cultivation of management resources, organizational knowledge and competence, to reach that goal, we must make a sound property rights arrangement.