The Property Rights System Reform Of Rural Credit Cooperatives Research Based On The Pricipal-agent Literature

The rural credit cooperatives still exist a series of questions, such as unbalanceddevelopment between different regions, uncertainty of property rights, the absence ofowners, and imperfect corporate governance structure. Faced with this new situation,the CBRC issued “the guidance of accelerating the shareholding system reform ofrural cooperative financial institutions” in2010. With the requirements of thisdocument, rural credit cooperatives need to be thorough shareholding system reformas the core of the reform of property rights in accordance. At the same time, inaccordance with the requirements of the CBRC stable county, The rural creditcooperatives should mainly set up small-scale rural commercial banks in city levelafter the reform. This paper analyzed the principal-agent problem of rural creditcooperatives system of property rights to explore the Game relations between thesubjects of rural credit cooperatives, and the idea of property rights system reform ofrural credit cooperatives.Based on review of the pricipal-agent theory and the theory of small banksadvantage, this paper analyzed the following four problems: the absence of monitors,agents’ lack of effective incentives, so long principal-agent chain and the internalcontrol existing in property rights system of rural credit cooperatives and establishedthe two-stage game model between loan officers and senior managers, between seniormanagers and members as well as the game model between the senior managers andthe provincial association (local government). The results of the Game analysisshowed that:(i) the possibility of violations of loan officers is directly proportional tothe monitoring costs, and is inversely proportional to economic sanctions and theeffectiveness of supervision; the possibility of supervision of senior management isdirectly proportional to the rental income of loan officers, and is inverselyproportional to economic sanctions, the normal return of loan officers, and theeffectiveness of supervision;(ii) the possibility of violations of senior managers isdirectly proportional to the monitoring costs, and is inversely proportional toeconomic sanctions, the effectiveness of supervision and the shareholding ratio of theoverall membership; the possibility of supervision of members is directly proportionalto the rental income of senior managers and the shareholding ratio of the overallmembership, and is inversely proportional to economic sanctions, the effectiveness ofsupervision and the Shareholding proportion of senior managers;(iii) Expected profit of rural credit cooperatives is inversely proportional to effort cost coefficient ofsenior managers, and the relationship of the expected profit and the constraints degreeof internal control system is non-linear, when the degree of internal control systemconstraints is greater than a certain percentage, the expected profit of rural creditcooperatives increases with increasing internal control constraints, and when theinternal control system constraints extent is less than the percentage, the expectedprofit of rural credit cooperatives decreases with increasing internal controlconstraints, and this percentage is determined by the percentage of senior managers toprepare the book profit.At last, this paper propose the path selection of the property rights system reformfor the different circumstances of developed areas and backward areas, which includemoderately concentrated ownership structure and diversification, the establishment ofsound corporate governance structure, select the appropriate mode of the province ofAssociated Press, resolve the historical burden, improve their management modelsand optimize the external environment.