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Securities Investment Fund Analysis, Economics And Law

Posted on:2006-10-01Degree:DoctorType:Dissertation
Country:ChinaCandidate:J Y YeFull Text:PDF
GTID:1116360152485661Subject:National Economics
Abstract/Summary:PDF Full Text Request
As one of the major institutional investors, the mutual fundindustry has been playing an increasingly important role in thedevelopment of global securities markets. However, the occurrence offraudulent practices in the mutual fund industry, including thosewitnessed by China in 2000, USA and Hong Kong in 2003, has led toreflections and research efforts on this industry both by academiciansand practitioners. So far, most of the research on mutual fund tends tofocus on the structure and mechanism of mutual fund governance. Newefforts are needed to be made in probing such questions as thefundamental economic and legal characteristics of mutual fund, why itthrives, how property rights are allocated among stakeholders. It isalmost impossible to have a profound understanding of the mutual fundindustry if these questions are not properly addressed. This paperprovides in theory a systematic analysis of the origin and economic andlegal characteristics of the mutual fund industry, as well as theoreticalunderpinning for fund governance. In view of the common confusionbetween mutual fund governance and governance of the fundmanagement company found in many research papers, the authorpresents a conceptual analysis of these two types of governance, beforededicating a whole chapter on the discussion of fund managementcompany governance. In a nutshell, this paper presents the author'screative thoughts on four key issues: the fundamental characteristics of amutual fund, theoretical underpinning for mutual fund governance,governance mechanism, and the governance of fund managementcompanies. This paper is composed of six chapters. In the Introduction, the author outlines reasons for topic selection,scope of and approach to research, major findings and key themes of eachchapter. Chapter â… . An analytical framework of contract economics. Theauthor presents an economic analysis of mutual fund within theframework of contract economics. Since contract theory is best reflectedin the analysis of enterprise theory, the author builds his analyticalframework of contact theory through his review and analysis of theenterprise theory. Mainstream enterprise theory-the contract theory ofenterprise, can be summarized as the following: A. the contractual natureof an enterprise. B. imperfect contracts (uncertainty of the world, limitedrationality of people, existence of transaction costs). C. the importanceof allocation of property rights of an enterprise as a result of an imperfectcontract (the allocation of residual claims and residual control,optimization of contracts). Enterprise theory is made up of threebranches: transaction cost theory, property rights theory andprincipal-agent theory. The existence of transaction costs is an illustrationof contractual imperfectness in the enterprise theory, while property rightstheory is part of the contractual rights allocation theory. Theprincipal-agent problem involves contractual optimization. Contractualimperfectness stems from uncertainty and complexities of theenvironment, limited rationality of people, imperfect and asymmetricaldistribution of information, opportunistic trends and the existence oftransaction costs. The imperfect nature of mutual fund contracts makesthe allocation of contractual rights a critical issue. How the residualclaims and control are allocated between human capital and non-humancapital depends on the result of their gaming. The allocation process isnot constant, but rather dynamic. Chapter â…¡. An economic analysis of mutual fund. In essence, mutualfund is a special contract between various non-specific, non-humancapital factors and a human capital team organized as a body corporate.The economic characteristics of mutual fund can be viewed in threedifferent facets: First, it is a financial contract; Second, it is a relationshipcontract; Third, it is a special contract between non-specific non-humancapital and a human capital team as a body corporate. Human capital ismost important in a fund management company, and in fact non-humancapital can not assume risks nor can th...
Keywords/Search Tags:Relationship contract, Contractual right, Principal-agent, Business trust, Fund contract, Fund governance, Institutional evolution, Human capital, Corporate governance
PDF Full Text Request
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