The Research On Contract Mechanism For Venture Capital Under Asymmetric Information

Venture capital is a new pattern of financing with a unique contractual mechanism. Investors, venture capitalists and entrepreneurs form double-sided agency relation, these bring on several kinds of asymmetric information and complicate interest conflicts, the optimal Pareto solution cannot be achieved. Therefore, under asymmetric information, different contracts are established not only between investors and venture capitalists, but also venture capitalists and entrepreneurs by game theory and contracts theory. These improve venture capital income and efficiency. These questions are starved for being solved among theory and economy industry. This is why the dissertation is studied.The paper is divided into six chapters. The first chapter is about the issue background, relative research review, research tool and content. The second chapter is the research on contractual mechanism of venture capital institution under asymmetric information. The third chapter is the research on contractual mechanism between investors and venture capitalists. The fourth chapter is the research on the contractual mechanism between venture capitalists and entrepreneurs. The fifth chapter is the research on contractual mechanism of venture capital exit. The sixth chapter is the conclusion and expectation. The main outcomes of the paper are shown as follows:(1) The paper studies a contractual mechanism on venture capital institution under asymmetric information. It takes the net cash flow and cost income as the target function, a contractual theory model is set up. The model gives why venture capital institution exists and analyzes different contract form. The different contract form is quantitatively analyzed by reward incentive model. It points out that limited partnership is the most optimal. Some advice is brought forward aiming at some questions on venture capital institution in China.(2) The paper studies a contractual mechanism model between investors and venture capitalists under asymmetric information. Aiming at adverse selection question for venture capitalists, the incentive contract model is set up when both venture capitalist's ability genres and efforts are unobservable, the optimal contract can keep away adverse selection behavior of venture capitalists and assure the investor's cash rationality. In order to solve lemon phenomenon of investors, a contracted model is set up using transferable constraints as a variable. The model can effectively discriminate liquid investors and illiquid investors and keep away the liquidity risk of venture capital, so some decision-making gist is provided for venture capitalists. Aiming at moral hazard question between investors and venture capitalists, an incomplete information dynamic model is set up, the first-best solutions are solved which are investor's critical monitor costs and venture capitalist's critical income, analyzes their correlative factors, explains reasonably some system arrangement, changes the phenomenon of the most present research only considering static perfect information.(3)The paper studies the contractual mechanism between venture capitalists and entrepreneurs under asymmetric information. Generally, the moral hazard is solved by investment tool, stage investment, portfolio investment and syndication. The convertible preferred equity can protect investors, bestir corporation administers, gain investment return and participate company increase, so it is the most important investment tool. A single contract incentive reward model is set up for staged investment, the contract and exit time is optimized. The contract overcome some disadvantage which bargaining must be resolved every investment stage, make for stabilization and movement of venture capital. The portfolio investment model is set up using the number of projects and the share of each project's profits as variables, the first-best solution is solved and affects the effort levels of the entrepreneurs and the venture capitalists, changes the present question that the variables are not controlled. A syndication model is set up whose variables are investment and income, under symmetric and asymmetric information, it analyzes how the optimal syndication contracts can induce venture capitalists to truthfully reveal their signals to each other, vary with the quality of venture capitalists' expertise in evaluating projects, The model provides with decision-making gist in second and later stage syndications.(4)The paper studies the contractual mechanism when venture capital exits under asymmetric information. It sets up exit decision-making model under partaking convertible preferred equity. The model studies the optimal exit solution, analyzes the determinants of exit. Aiming at whether to exit fully in IPO, a game model is set up. It analyzes how reputation affects exit, gives an effective way how the reputation is established. A bargaining model is founded for trade sales exit and gives equilibrium conditions and analyzes some factors what effect equilibrium price. The model provides with decision-making gist for venture capital exit.