Economics Of The Chinese Stock Market Institutional Change

I. The choice of the topic and its significance for research Since Coase won Nobel Prize for Economics and the Institutional Economics was gradually accepted in the economist circle, Coase and his followers' theory was introduced to China. China's gradual economic reform is the greatest institutional transition in the twentieth century. It enriches the content of Institutional Economics and provides more space for the development of Institutional Economics.In the meantime, Institutional Economics is characteristic of the shrewd observation of the first rate economists in China and superficial analysis of the third rate economists. In particular, the theory on the historical process of the formation of China' s stock market from the perspective of Institutional Economics is far from satisfactory. Of course, a sound understanding of reality of China can not be attained without a research into the formation process. Solution to the relevant problems is based on a thorough understanding of the facts.In this case, the thesis aims to give an explanation about the historical process of China's stock market using basic principles from the Institutional Economics. The author holds that the purpose of economic research is not to restructure the world to make it conform to the subjective judgment of some people or economists. The opinion is based on two considerations. One is that it touches on the value judgment of moral philosophy and beyond the scope of economics. Another is that the research status of economics is still in the era of alchemy and incapable of fulfilling such a grand pursuit. Therefore, the significance of economic research is to explain theeconomic phenomenon and human behavior, which helps us to understand the world better. This is exactly the main purpose of the thesis.II. The main content of the thesisThe thesis is divided into two parts.The first part: theoretical analysisThe first part gives a comprehensive review of Institutional Economics. It is composed of two sections, which are theory on institutional transition and corporate financing theory.1. Transaction cost, institution and property rightInstitution is actually some kind of contractual relationship reached through competition and cooperation of individuals in a society lacking resources. In this sense, a world such as Robinson Island does not need institution. Besides, in neo-classic world of no transaction cost, institution does not make sense because any conflict can be resolved through negotiation without any cost. Coase made contribution by introducing the concept of transaction cost, which opens the door of Institutional Economics research.Institution includes formal institutional arrangement and non-formal moral constraints. The core is the definition of property right for the sake of resource usage. Neo-classic economics hypotheses clear property right is ascertained before transaction. The form of property right and its origin and evolution are the research object of Institutional Economics.2. Transaction cost and institutional evolutionInstitution can be recognized as an arrangement that minimizes transaction cost, but the existence of transaction cost also indicates that institution can not be so specific that all human behavior can be regulated by institution. The participants always choose to maximize their own interests by utilizing the change of relative price based oncost-benefit analysis.3. Theories on ideologyOur behaviors seem to be affected by the education received, environment and our judgment on value and life. People do behavior sometimes inconsistent with the result of cost-benefit analysis.The theory of social science explains when people behave as an economic agent does and when they don't.4. The theory on stateAs an entity that is the principal party in the compulsive transition and protector of inductive transition, state does not provide the property institution that maximizes social output or welfare.North has put forward his own neo-sta...