Venture Capital Governance Mechanism

As venture capital system would contribute to the industrial structureadjustment in our economic structure adjustment trend, this dissertation hasfocused on the governance and contractual mechanisms of the venture capitalmechanism, which are the core functions in the venture capital system. Byapproaches of the contracting theory and the financial contracting theory, thisdissertation aims to probe how the two substantial contracts in the venturecapital system---limited partnership contract and stock purchaseagreement---solve the principal-agent problems. This dissertation will go on like this: First, the dissertation summarized theconcept systems of, the nowadays development and future trend of venturecapital, and the economic theories used in the dissertation, especially thefinancial contracting theory. Second, in the second chapter, the main problemis how the incentive mechanism and covenants in limited partnershipagreement solve the biased information and principal-agent problem betweenoutside investors and venture capitalist. Third, based on the contents of stockpurchase agreement, the dissertation try to probe the governance structure ofventure investment process. Stage financing gives venture capitalists thechance to balance between agency costs and governance costs, and alsoenables the state contingent cash flow incentives and control rights allocation,the two main functions in the governance structure of venture investmentprocess. Forth, "robust financial contracting and syndicated investment" isreanalysis of governance structure in venture investment. The dissertationfigures out the only financial contract leading to optimum invest decision is therobust financial contract and the late-stage finance should be united. Fifth,after concluding from the basic statistics in Chinese venture capital industry,the dissertation gives three characteristics of Chinese venture governancestructure. Finally, a staged development model was given to build areasonable governance mechanism structure in China.