Research On The Relationship Between Governance Structure And Performance Of Chinese Fund Management Corporation

After ten years of development, the securities investment fund has become China’slargest institutional investor and would become the carrier of pension and housing providentfund invested in the capital market in days to come. It’s of great significance to research thebehavior, performance and development of a fund management company. Whereas afterexperiencing the great-leap-forward development in2007, the growth of Chinese fundindustry slowed down in recent years. Therefore, it has theoretical and practical significancefor analyzing, improving and optimizing system design of the fund industry.This paper makes research on governance structure of a fund management company withthe double principal-agent relationship. Compared with the general corporation, thegovernance structure of a fund management company has its particularity. Being differentfrom the general business of single principal-agent relationship, a fund management companyexists a double principal-agent relationship. The first layer of principal-agent relationship isbetween the shareholders, the owner of the enterprise, and the fund management company.The second layer of principal-agent relationship is between the fund holders, the fund assetowners, and the fund management company.This paper also conducts research on the performance of a fund management company,specifically assesses from two dimensions of value and morality, which refers to financialindex and the compliance of management behavior. Morality is the cornerstone of financialperformance. Combined with the special nature of trust relationship and financial enterprises,a fund management company is determined that its performance evaluation includes not onlyits profit contribution for shareholders and fund holders, but also the management ofcompliance, moral behavior as honesty and trustworthiness. Therefore, the optimalperformance of a fund management company depends not only on devotion to maximizationof profit, but also on the moral practices by itself.Based on the principal-agent theory, with a fund management company and itscontractual funds as the object of study and the fund industry data in2010as the basis,through the establishment of multivariate regression model, the paper makes an in-depthstudy of the relationship between the characteristics of corporate governance and itsperformance. The paper also analyses the factors of corporate governance impacting onperformance and explores the ways of improving corporate performance and strengtheningfund holders’ protection as well. The paper not only analyses the investment achievementand corporate financial performance of a fund management company, but also evaluates the fund management company’s ethical norms, namely code of conduct, from the twodimensions of value and morality, which it’s more comprehensive and scientific than onlyanalyzing the traditional financial performance. The paper focuses on the fund managementcompany "Soft Dollar" phenomenon and whether the existence of "Making Star" by means ofempirical perspective, in the meantime, analysis on the behavior of the fund managementcompany, which is a new exploration.Through the research, the paper considers that the modern enterprise system does notfully play a promoting role in the performance of a fund management company because thefund industry, as an open and transparent industry, is strictly controlled and supervised by themedia and public instead of this mechanism for playing a role at present. With thedevelopment of the fund industry, the supervision department should further relax the controland promote the market competition, constructing the mechanism of legal protection andimplementation for the priority of fund holders’ interests.