Analysis Shanxi Merchants' Personal Share System By Institutional Economics

Merchants Personal share's mean is the shanxi merchants'manager and senior counterj umper could be entitled to equal shares of profit with investors, not needing capital but using their talents and contributions. The personal shares system was the affirmation of value of their labor force. It played an important role in the development of shanxi Merchants. If it didn't exist, shanxi Merchants wouldn't have so glorious history. Because of this, shanxi merchants'investors and manager could cooperation and use there ability to develop business. This system is created by repeated games between principal and agent. So if we research about personal share system, we should be more consider about the systems complement rather than just put into the data for historical research.The main function of personal share system are incentives and constraints. On the one side the system is using a lot of bonus shares and reputation to incentive manager. On the other side, merchants is very good at using the personal share system monitoring mechanism. Like the personal share system's supervision, the third-party enforcement institutions and an increase in the opportunity cost to constraining the agent.Now day, a lot of enterprises are based on the form of stock share to production and management. And if they used the form,they must adopt separation of ownership and management modes. It is the question that most manager and economics were really concerned about. Because when ownership and management were separated, the firm's business situation is closely related with their own ability and effort. So the arrangement of the modern enterprise system must reflect the two aspects of account. On the one hand, the arrangements of modern enterprise system have incentives to managers, make sure that managers enable their ability to contribution the enterprise. On the other hand, the enterprise should have the ability to constraining the manager, make sure that when agent have rational choice,they will not select opportunistic behavior or adverse selection. The personal share is supplied a good example for today's business system. Because in the minqin period, shanxi merchants organization is not only economic organization but also social organization. It have economic function and social function both. They can solve the principal-agent problem is because their design and implementation of the personal share system. It played a huge role. If we research really deeply,then we will find out how to solution the problem of principal-agent.This article's research scope included institutional economics, the develop history of Ming and Qing and current research about shanxi merchants. In the other hand this article will using some other theory, like micro-economics knowledge, to resolve the principal-agent question.The main content of this article is using institutional economics to study into shangxi merchants organization. If we analysis in those question like why the personal share system are exist or the effectiveness this system. Then we will find out what relationship between factors of economic operation, and provide the necessary reference to modern enterprise.This article's construction is structured as follow:The first part is talking about the background of research and basic of theory. The background of research is included about the history of shanxi merchants, the types and characteristics of personal share system and history research profiles. Basic of theory are theory of Incentive and theory of institutional change. The second part is described the structure and effect of personal share system. the third part is discuss the economic reasons of why this system exist, such as property rights, ideology, etc.; the fourth part will comparison old system and the new system's different. then we will get the inspiration for this; fifth part is to summarize the main conclusions of the article.