Fund Governance Structure: An Analytical Framework and Its Explanation of Chinese Issues

Author: Li Jianguo
Publisher:
Publish Date: 2003-03-01
Features: This book proposes an analytical framework for a market-oriented fund governance structure, using it to explain the current issues in fund governance in China and offering countermeasures and suggestions for improvement. The central problem addressed by fund governance structure is the incentive and supervision of fund managers. Fund governance consists of three elements: internal governance, external governance, and third-party governance. A fund governance structure is an arrangement and combination of these governance elements according to certain rules. The marketization of fund governance requires establishing fund governance on the basis of equal transactions and free choice, allowing the market to play a foundational role in governing various fund elements. This is specifically reflected in:
(1) A shift in fund organizational forms from predominantly closed-end funds to predominantly open-end funds;
(2) A shift in fund governance from supervision-oriented to incentive-oriented;
(3) A shift in fund incentives from investor incentives to fund manager self-incentives—reputation mechanisms—primarily;
(4) A shift in fund constraints from investor constraints to market constraints;
(5) A shift in government regulatory positioning from replacing the market to complementing the market, forming a market-oriented evaluation and supervision system for fund managers.