The Study On Effects Of Fund Manager Ownership In China

After nearly two decades of development, securities investment fund has a considerable scale, and has played an irreplaceable role in Chinese capital market. The healthy development of the fund industry is of great significance to China’s capital markets. Regardless of the rapid development of the fund industry, it still has great problems remained to be solved. One of those is the governance issues. The failure of the incentives and oversight mechanisms makes the information asymmetry between the investor and manager more severe. Thus, the agency problems in the fund industry, caused by information asymmetry, not only undermine confidence of funds investor, but also hinder the development of the fund industry. From the reference of the theory of corporate governance, managerial ownership in funds might be a useful method to reduce the principal-agent conflicts between fund managers and the investors. This paper studies the effect of such incentive mechanism.Base on the principal-agent theory, this paper first analyzes the agency problems existing in the fund industry. Then a principal-agent model is constructed to analyze the effect of managerial ownership in fund. Theory research found that managerial ownership in fund can promote the effort of the manager, thus promote the return and reduce the risk of the fund.In order to have a better understanding of the effect of managerial ownership in fund, on the basis of the theoretical analysis, we conduct four empirical examinations. The research suggests that managerial ownership in fund does improve the efficiency of fund. Also, we find that managerial ownership can release positive signals, attract capital flows. Capital flows have significantly influence on managerial ownership. Finally, we propose a suggestion of managerial ownership mechanism.