Division Of Labor, Contract And Stock Market Efficiency

Using the contracting theory and the information economics to analyze the efficiency of China' s stock market from the aspect of the contractual coordination of the division of labor, the paper points out that the cause of the present inefficiency lies in the monopoly distribution of residual rights to the insider, which is resulted from the government interference. The paper puts forward the corresponding countermeasures to protect the investors.Economic efficiency is dynamic efficiency, based materially on the efficiency of division of labor and specialization of the individual. It is realized through the coordination of institutions that plays the role of defining the property of the initial investment of the individual as well as the surplus of division of labor. And, Ihe coordinative effect of institutions to the division of labor can be summarized into three categories: property mechanism, competition mechanism and the third party regulating mechanism. Thanks to the "Learning by Doing" effect on division of labor and the cost of information seeking, the definition of property is always incomplete. As a result, the distribution of residual rights becomes the nucleus of institutional coordination.The potential residual rights are determined by the inner superiority of production founded on division of labor, while form residual rights by institutional factors. So the two kinds of control should be made adaptable to each other so as to gain the distribution efficiency of institutions through institutional coordination in short term, and the efficiency of institutional change in the long run. On the whole, the economic efficiency is the synthetic representation of technology efficiency based on division of labor, and coordinative efficiency of institutions.The paper advocates that the material base of the efficiency of the stock market is the performance of the listed company, which is the result of the production based on division of labor. Therefore the realization of labor-dividing production in a firm needs the dynamic distribution of residual rights in the firm contract. Under normal operation, the firm contract can be simply referred to as the contract between the shareholder and the manager that is reached by stock contract. And in the light of the Nash's negotiation theory, the paper sets up the negotiation model of the shareholder and the manager, which analyze the difficulty of contracting in the changes of thecontracting domain as well as the efficiency of stock market according to the difficulty of contracting, and focuses the analysis on the influence of the institutional factors of the stock market to the contracting behavior between the shareholder and the manager. On one hand, the issuing of the stocks indicates the contracting process between the shareholders and the manager as well as the course in which property mechanism is given full play. In consequence, the interior company governance structure is formed. On the other hand, stock trading also points to the renegotiation between the shareholders and the manager besides the course in which the competition mechanism plays. In this way, the exterior company governance structure is laid down. As for the supervision institution of the stock market, it is the third party regulating mechanism that is expected to tackle the malfunction of the market mechanism. Consequently, the mature stock market built upon private ownership can realize the dynamic distribution of residual rights in the firm contract.Against the institutional background of our transition economies, from the aspect of institution linkage, the paper presents that the institution of the stock market of our country is born through the intervention of the government. In China, the government manipulates the stock issuing and listing of a company so that the state-owned share becomes the largest shareholder in the stock equity structure of listed company. Then in the absence of the state-owned shareholder, the insider control and the leading shareholder control mix toge...