The Research On Effects Of Fund Managerial Ownership In China

With the development of the capital market in China, securities investment fund has become one of the most important fund sources from institutional investors in the market, and thus the rapidly expanding of fund industry produces profoundly influence on the steadiness and healthiness of the capital market. However, fund governance issues come to light gradually. Fund perfidious acts, such as rat trade and transportation benefits etc., which harm the profit of investors, cause investors to lose confidence in funds. These problems arouse people to ponder upon how to alleviate the principal-agent conflicts between fund managers and investors, encourage and regulate fund managers effectively, prevent improper conduct of fund managers and protect investors. The solution to these matters is to align profits of fund managerial with those of investors. In terms of the theory of corporate governance, equity incentive is an important mechanism to realize the profits alignment between managers and shareholders, and to reduce principal-agent conflicts between managers and shareholders. What will be studied in this paper is that whether or not such incentive methods can help to realize the profits alignment between fund managers and investors.China Securities Regulatory Commission revised the regulations on relevant matters that fund practitioners invest in securities investment fund in2012.Purpose of the revision is to encourage fund management companies to make relevant arrangement related to the matter that fund practitioners invest in the fund managed by themselves or their company, so as to further promote the development of fund managerial ownership incentive mechanism. Based on this background, we investigate the effects on fund managerial ownership in two aspects:theoretical and empirical.The principal-agent model about fund managers and investors is constructed in this paper. In this model, we compared utility of managerial decision-making behaviors in two cases:fund managers hold and doesn’t hold fund shares. Plus, we studied effects of managerial ownership theoretically. The conclusion of this model is that managerial ownership conduces to improve the degree of managers’hardworking, control the risky choice of managers effectively, and reduce fund risk-taking. In addition, we also studied influences of proportion of managerial ownership.Finally, on the basis of the theoretical model, we applied the empirical test of effects on managerial ownership in this paper by using open-end funds in China as research object which be divided into equity funds and non equity funds two sets of samples according to the fund investment style. The research suggests that equity funds performance is positively related to managerial ownership, while risk-taking is negatively related to managerial ownership. Unlikely effects on equity funds managerial ownership, there are no positive effects on managerial ownership of non equity funds. The proportion of fund shares held by non equity fund managers doesn’t have significantly influence on the fund performance, but even increase the risk-taking of funds. The empirical research also shows that fund size, the time since the forming of the funds, the rate of change of market index and risk-free return have significantly influence on managerial ownership.