Research On The Internal Control Of Chinese Private Equity Fund

The research background of this paper is that at present, our equity investment fund industry is still in the initial stage of development, the regulatory approach of the relevant theoretical circles of China equity investment fund, internal control is no consensus in theory, in practice there are a lot of confusion, policies and laws there are a number of uncoordinated and system problems, formed a large obstacle to the development of equity investment funds in China.This research path is starting from the content and operation mechanism of the equity investment funds, the analysis of the problems of the development status of China’s equity investment funds and internal control; on the basis of problems in the current application of principal-agent theory, the five elements of the control of the internal design a scientifically sound internal control framework, combined with China’s equity investment fund, the actual organizational structure and operational processes; elements of internal control risk assessment, according to the characteristics of equity investment funds, the application of fuzzy comprehensive evaluation method, considering the equity investment the Fund’s internal control various risk factors, to measure the risks associated with equity funds, the risk assessment model to design an equity investment fund, and actual cases to carry out a quantitative analysis using the model; on how to regulate the development of China’s equity investment fund industry made a number of policy recommendations.The academic value of this paper is tentatively designed our equity investment in the Fund’s internal control framework, and set up the equity investment in the Fund’s internal control risk assessment model as effective tool to strengthen internal control. The five elements of internal control in the design of the internal control framework, all integrated into one, to ensure complete and scientific equity investment in the Fund’s internal control system. Internal control framework for the purpose of operating effectiveness and efficiency to achieve the target path is divided into two levels, first level is to establish a rational organizational structure, the second level is designed to control the power of running processes. Within this framework, the equity investment fund, internal control mechanism was included in the three processes, ie, advance prevention, control and supervision and evaluation afterwards. In these three processes, mainly uses four control means to concrete implementation of internal control. Equity funds invested enterprises are generally not listed companies, fair value information is more difficult to obtain, in advance, and post-investment projects to effectively carry out risk assessments to become a difficulty. China equity funds making those risk assessments, most still use a more qualitative approach, subjective and difficult to effectively prevent and respond to the increasingly complex risks of equity investment funds. Therefore, the use of modern risk assessment theory and methods, the first time financial information and non-financial information into a unified analytical framework, and the use of fuzzy comprehensive evaluation method of qualitative risk evaluation criteria into quantitative risk evaluation, in order to calculate the risk value the size of the risk of a relatively accurate measurement, as equity funds and external regulators in the pre-investment and investment in the Fund’s risk assessment and control, equity investment funds in China to strengthen internal control aids.The paper is divided into seven chapters. The following chapter is organized as follows:Chapter1, Introduction. Introduction part of this study, the research background and significance, and defines the basic concepts involved in the paper summarized the research objectives, research ideas and research methods, an overview of the main content of the paper and structural arrangements, and pointed out the characteristics and the main innovation of the paper.Chapter2, literature review. The theoretical study of domestic and foreign equity investment in the Fund’s internal control in accordance with the generation of internal control, risk assessment and control measures three aspects of the comb. Through literature review, you can see, the existing research on the internal control of the equity funds focus on the principal-agent theory and asymmetric information theory to analyze the causes of internal control problems and to make certain control methods, but has not been studied system designed internal control mechanisms of the equity investment fund, and an able financial and non-financial indicators combined quantitative models for risk assessment is still lacking. Based on literature analysis, this paper presents the necessity of our equity investment in the Fund’s internal control.Chapter3, Summary of the relevant theory. This chapter describes the theoretical basis of the equity investment in the Fund’s internal control for the study of the problem based on retrospective study, combined with this study, the principal-agent theory, asymmetric information theory, signal transmission theory, the theory of reputation mechanism and internal control theory The theoretical basis for the design of internal control mechanisms as an equity investment funds in China, and from the theoretical level, the internal control of the equity investment fund for analysis.Chapter4, the development status of China’s equity investment funds and faced with internal control problems. This chapter first describes the development of the industry status quo of China’s equity investment and the regulatory system, certainly at this stage of achievement, from the policy level, organizational level and operational level, top-down detailed analysis of the internal control of the equity investment funds in China is currently facing more the need for equity investment funds in China to establish internal control mechanisms.Chapter5, the design of our equity investment in the Fund’s internal control mechanism. This chapter, combined with the internal control issues facing our equity investment fund, according to the characteristics of equity funds, starting from the five elements of internal control, the design of our equity investment in the Fund’s internal control framework, and from the frame system and control the contents of two, discusses the internal control framework.Chapter6, our equity investment in the Fund’s internal control risk assessment model. In this chapter draw on domestic and foreign-based equity investment fund based on the study, combined with the status quo of China’s equity investment fund, proposed the idea of the quantitative equity investment fund risk assessment model, through the use of fuzzy comprehensive evaluation method, the equity fund investment projects in the financial and non-financial information into quantitative indicators, in order to estimate the size of the risk value, a relatively accurate measurement of risk, equity investment funds in China to strengthen internal controls in order to become an effective tool. Combined with practical work in a case, the integrated use of the model of case analysis.Chapter7, conclusions and outlook. This chapter summarizes the conclusions and limitations of this study and propose further research direction suggested that the development status of China’s equity investment fund related policy recommendations.In this thesis, the main characteristics and the main innovation of the following aspects are as follows:An equity investment fund invested enterprises are generally not listed companies, less liquidity, information disclosure is not open, the principal-agent problem is more prominent, there are two layers commissioned investors (LP), the Equity Investment Fund (GP) and investment companies an agency relationship. The theory of principal-agent theory and information asymmetry as the internal control theory, drawing on the latest achievements of domestic and international equity funds with a systematic design of our equity investment in the Fund’s internal control framework, the framework design to the five internal control elements all integrated into one, to ensure complete and scientific equity investment in the Fund’s internal control system. The framework for the purpose of operating effectiveness and efficiency, will achieve the target path is divided into two levels of the organizational structure and operation of process, things in advance prevention, control and supervision afterwards to evaluate the three flow mechanisms to protect, in the three processes mainly operational control, financial control, risk control and audit audit four control means to concrete implementation of internal control.Two equity funds invested enterprises are generally not listed companies, fair value is difficult to obtain, based on the development status of China’s equity investment funds and the existing problems, the application of fuzzy comprehensive evaluation method proposed internal control risk on equity investment funds econometric model for the first time financial information and non-financial information into a unified analytical framework, the qualitative risk assessment standards into quantitative risk evaluation, in order to estimate the size of the risk value, its risk is relatively accurate measurement, as equity investment funds and external regulators in the pre-investment and investment in the Fund’s risk assessment and control, equity investment funds in China to strengthen internal control aids.3. More complex international financial crisis has entered a new stage, the United States and Britain and other developed countries in Europe and the United States have stepped up supervision of hedge funds and other private equity funds, especially equity funds still "self-discipline-based, regulatory, supplemented, is to strengthen the supervision of qualified investors, the equity investment fund for the record management and information disclosure. Equity funds has become an important component of China’s capital market, but the blur of their legal status and regulatory gaps has become the biggest stumbling block for development of industry standards. This article draw on the latest progress of the international supervision of the equity funds, regulatory status and problems from our equity investment funds, in the context of the international financial crisis, our country regulate the development of the relevant recommendations of the PE funds, and regulate the development of China’s private equity funds have the same reference.