Research On Tournament In Chinese Fund Managers And Its Implicit Effects

After nearly20years developing of Chinese securities market, Securities Investment Fund worksas one of the most important investment institutions and is playing an increasingly important role inpromoting the healthy development of the security market and the rational allocation of market’sresources. Open-end fund is the main part of fund family; it has showed some market’s characteristicsworth our concern and serious study, such as the “tournament effect”. Therefore, it is of vitalimportance to apply incentive mechanism to protect the interest of stakeholders and avoid moral risk.The role of incentives mechanism, especially the implicit incentive mechanism, has become quiteimportant.This paper aims at analyzing the effect of the implicit incentive mechanism, that is, thetournament effect, on the investment behavior of fund managers and fund performance. Furthermore,it tries to find the key factors making incentive functions weakened and then puts forward solutions.This article by theoretical research on the commissioned agents phenomenon in the China’s equityopen-end fund, the behavior of fund managers and fund contracts incentive system and use daily datafor the empirical analysis of the stock open funds and open-end fund tournament effect. Theconclusion indicates that firstly, the tournament effect is existing in China’s open-end funds market;secondly, it has established the theoretical models, which could reveal the external causes and internalmechanism of tournament effect. Then, it can draw the include that tournaments effect is a naturalresult under the agency system, for the reputation effect that can contribute to the funds flows willinevitably lead to involuntary participation of fund managers in the race to the high rank; thirdly, oneof the characteristics of tournament effect in China’s open-end fund is unique, the fund managers willbecome more boon or slack when the market overheating or cooling. In response to the phenomenon,we analysis this from the change of fund share and investor’s action and other aspects, thencompletely disclose the necessity and rationality of it.