Study Of Principal-agent Risks In The Enterprise Pension System

The enterprise pension system is an important part in the multi-level old-age pension system of China. Based on the principal-agent theory, this research paper analyzes the enterprise pension system, and it falls into five parts: In the first part, the researcher reviews literatures on the necessity of building up the enterprise pension system and the lag in the practical enterprise pension system of China, the principal-agent relationships and problems in the enterprise pension system, and the development of principal-agent theory. Then the research method and meaning of the research has been pointed out. In the second part, there are there aspects. Firstly, the researcher analyzes the enterprise pension system's attributes. Then, the establishment and development of the China's enterprise pension system have been mentioned. After that, enterprise pension system involving several participants and thus leading to lots of principal-agent relationships have been discussed. The third and fourth parts are the major parts of this research paper. The major points are as follows: For some subjective and objective reasons, agents'problems in some ways are unavoidable. Every participant is perusing its own interest to the maxim; information is asymmetric; enterprise pension's contract is not perfect and surplus controlling and surplus demanding that participants have are not matched. All these facts result to adverse selections and moral hazards existing in the enterprise pension system. On basis of analyzing the principal-agent problems in the enterprise pension system, some suggestions on relieving agent problems have been put forward in fourth part of the paper. The key point is to build up an incentive mechanism and a construct mechanism. For example, give different payments to agents according to their working outcome comparing to market average returns; make the agents markets competitive; perfect law and regulations; establish certain institutes to make an overall watching and controlling to the enterprise pension system, etc. In the last part of the paper, the researcher gives a brief summing-up, and some deficiencies have also been mentioned.