The Study On Law For Securities Investment Funds To Intervene In Corporate Governance

Ownership structure is the indispensable factor of studying the corporate control, principal-agent relationship and the protection of the interest of minority shareholders. A sound ownership structure can guarantee the legal interests of investors and company stakeholders and effectively prevent the abuse of power by staff in the corporation. Different ownership structure determines different focus of corporate governance. As for the corporate governance of highly concentrated ownership structure, the priority is to curb the encroachment of interests of minority shareholders by the other shareholders. The overwhelming majority of corporations in China belong to the highly concentrated ownership structure. Thus, the sticking point of corporate governance lies in the overwhelming control of state-owned shares and the control from insiders.Security investment funds is specialized financial and investment institution, its participation in the corporate governance contributes to the competitive ownership structure of checks and balances among several large shareholders. Therefore, the status quo of single big holder will be changed and the interests of minority shareholders will be guaranteed. Security investment funds, as a specialized subject of investment, have advantages in capital and human resources, hence, it can effectively reduce the cost of corporate governance. The fund itself resolves the problems in adverse selection and moral hazard which are ubiquitous in principal-agent relationship.Security investment funds in China already realized the importance of participation in corporate governance. However, the security investment fund still has no concept of long-term investment and does not show enough initiatives in participating in corporate governance due to its shortage of development and defects in institution of law concerning securities market. The main way for the fund to participate the corporate governance is through rights of proposal and voting rights from general meeting of shareholders. Nevertheless, this level of participation does not meet the expectations in corporations with highly concentrated ownership structure. In order to strengthen security investment fund's participation in corporate governance, we should firstly embark on advancing reform of equity division, improving shareholders classified voting system, developing the mechanism of collection of voting representative, enhancing as well as mechanism of information disclosure and strengthening the obligations of trustee of fund.