Held Based Incentives Affect The Investment Behavior Of Fund Managers

As securities investment fund takes an increasing important role in the capital market of China, fund management companies'internal incentives attract more and more researchers'attention. The investment behavior of fund manager plays an important role in the development of the fund. As the information asymmetry being existed between fund investors and fund managers, holding fund incentives appear and are widely used to avoid the moral hazard of fund managers. Based on equity incentive theory and theory of investment behavior of fund managers, using the literature research, models derivation and empirical research methods, this paper analyzes the relationship between holding fund incentives and fund managers'investment behavior, as well as the main affecting factors of holding fund incentives.From the view of principal-agent theory, this paper analyzes agency relationship existing in Fund industry, the influence of holding fund on the fund manager's effort level and the level of risk selection, leading to the discovery of factors affecting holding fund incentives. Theory research found that fund manager's effort level and their capability of obtaining information is promoted through holding fund incentives, these culminate in lower fund risk and higher yield. Simultaneously, stock market returns, degree of risk aversion and the scale of fund have influence on holding fund incentives.On the basis of theoretical analysis, the paper proceeds design and analysis of empirical from three aspects, using statistics of 310 open-end funds from early 2007 to middle 2010.Empirical test result on that the fund manager's effort level is positive related to the percentage of fund they hold, the level of risk selection is positive related to share of holding found too, while the fund managers'holding fund incentive is negative related to the market return, degree of risk aversion and fund scale. Taking the conclusion and status of fund management of China into account, this paper proposes some countermeasures on the design of fund manager incentive mechanism from the view of holding fund incentive.