Research On Governance Of Private Equity Fund

With the rapid economic development, China has already become one of themost active potential private equity capital market in the world. The main problemdiscussed in this paper is development of private equity fund compared with generalenterprise in China, its governance specific content, existing problems and how toimprove the governance.This paper is divided into four parts.The first part present the basic connotationof private equity funds,in order to talk about basic theoretical analysis. First, the basicconcept of the private equity funds is put forward.The theoretical concept at present isnot unitily defined, and the main existing difference is bewteen the generalied one andnarrow one. Later,on the level of the definition of theprivate equity funds, this paperanalys the main characteristics,such as the close financial source,the strongprofessional operation, low liquidity of capital and the Equity investment. Finally, thecurrent three main kind of organization of the private equity funds are discribedsimply.The second part of this paper discusses the basic theories of the governancebased on the definitions of the private equity funds,. First, the particularity of thegovernance of the private equity funds is discussed, putting forward that the privateequity investment funds is different from the general enterprise, with a agentrelationship between "outside investors" and "internal manager".So its governanceissues, are special too. Second,in the two parts of internal governance and externalgovernance,detail problems of the the private equity fund governance are discussed.Afterwards, analysis was carried on the fund operation of DING HUI investment,ZHONG KE ZHAO SHANG, two currently very active private equity investmentinstitutions, combining the basic problem of private equity fund management. Thepresent main defects of Chinese private equity fund management is summarized,andthis will be the direction to perfect private equity fund management.In the fourth part of the paper,some specific suggestions improving our privateequity fund governance are put forward. effective risk control system should beproposed to reduce agency cost; governance should be optimized, and a effective balance relations should be formed between investors and managers; concretemeasures such as perfect encouragement mechanism, the constraint mechanism, theinformation disclosure system, external governance mechanism and legislation,should be used to optimize the management of private equity funds.