Study On The Initial And Termination Decision-making Of Venture Capital Project

The development and growth of venture capital industry are depended on aperfect assessment system and correct decision-making method. Venture capitalist'sreasonable and correct decision-making influences the overall revenue of venturecapital firms in a large extent. However, there are many defects in the domesticinvestment projects' assessment and decision-making both in the theoretical researchesand applications at present, such as the simple in the decision-making of priorassessment, the formalization in the decision-making of operation, the blank in thedecision-making of abandon assessment. The study on venture capitalists'decision-making process is still in the stage of experience management whether intheory or practice, and it lacks a relatively perfect system and a sound method. The lagof the research on the venture capital's decision-making has seriously hampered thedevelopment of venture capital, and the development of venture capital practice needthe advice of venture capital theory.Considering this, this paper studies the decision-making of prior assessment andthe decision-making of operation process about venture capitalist on the basis ofprevious studies. It proposes a credit risk identification method of venture firm firstly,and then constructs an assessment method of total risk about venture capital projects,discusses the game problem of venture capital both sides' investment amount further,considers and proposes the model of venture capital project's terminationdecision-making based on the signal learning and termination time model on thisresearch structure finally.Firstly, this paper proposes an identification method based on VPRS which usesthe advantage of VPRS in dealing with noise data, and the empirical testifies themethod by the emerging technology listing firms, the result demonstrates the approachidentifying the credit risk well. This method provides a reference for decision-makingas the identification of credit risk.Secondly, it constructs an assessment method based on uncertain linguisticMADA on the base of the giving of credit risk identification method. It builds a risk assessment method based on the total risk by knowing the result of credit riskidentification. This approach could arrange the venture capital projects by risk, and italso could compare with the invested projects and the projects that to be chooseed toinvestment, it forms a pre-decision-making method of venture capital projects.Thirdly, it analyses the investment amount of venture capital project by applyingStackelberg game model. From the analyses, we conclude that the total investmentamount is determined by the debt incentive scheme and marginal cost of venturecapitalist; and the equity investment amount is determined by the absolute riskaversion factor of venture capitalist, the parameters of subjective income rate andincentive scheme. Furthermore, since the capitalist is assumed to be more risk aversethan the entrepreneur, he is made to be more optimistic than the entrepreneur.Lastly, aiming at the problem that the present termination decision methods ignorethe information's effect, we induce and analyse the information during the ventureproject development process, and then choose the good (bad) signal observed byventure capitalist as the binary learning signal, considering three stations that thegood(bad) signal observed along with project development, from the view of Bayesianposterior estimate, we propose the signal learning model, then decide the exogenousoptimal stopping point according to venture capitalist's boundary point psychologically.On the basis of it, we propose a termination time model further which choose the valueof venture capital project as endogenous variable. The construction of the approachprovides the reference for venture capitalist to make termination decision timely, and italso controls the risk of venture capital finns efficiently.In this paper, the initial and termination decision-making methods improve theevaluation tool and assessment method of domestic venture investmentdecision-making, and perfect the venture capital investment system, and improve theefficiency of the venture capital decision-making and the operation of domestic venturecapital industry in the micro-operation mechanism. In the 6th part, we also comparethe existing termination decision-making methods and the methods proposed in thispaper by the analysis of the case.