Allocation Of Control Rights Of Venture Firm And Impact Of Control Rights On Venture Capital's Exit Ways

With the establishment of innovation and entrepreneurship as the main characteristics of the economic growth model,the growth of the venture firm becomes increasingly important role in the development of economy.Venture capital as a kind of form of investment of the venture firm,promote the healthy development of venture firms,through the optimization of resource allocation,the combination of technology and finance.Venture capital will influence on the governance structure of venture firms,since establishment time of the venture firm is shorter,the degree of asset specificity is high,the prospect is not clear,there is a huge information asymmetry between the investment parties,so that the two sides can not sign a complete contract,in order to protect their own rights and interests,the allocation of control rights has become the focus of venture capitalists and entrepreneurs.Control rights as a “right to a state of interdependence” are changing in the growth of venture firms,the control rights are often allocated to the venture capitalists and entrepreneurs in proportion,and resulting in a different control right allocation,under different control rights allocation mode,there are significant differences in the interests of entrepreneurs and venture capitalists,as well as their respective objective functions,particularly,the different allocation of control rights in the process of exit of venture capital investment will make the entrepreneur and investor have a huge conflict of interest in the choice of venture capital exit,therefore,in order to avoid the conflict of interest between venture capitalists and entrepreneurs,enhance firm performance,and ensure the success of venture capital exit,the rational allocation of the control right of the firm and the impact of control right allocation on the exit ways of venture capital is very important,which constitutes the main problem of this paper.This paper starts from the practice of venture capital operation and corporate governance in our country,based on incomplete contract theory and financial contract theory,firstly,in the process of literature review,the paper analyzes the connotation,influencing factors of the control right allocation of the venture firms,the influencing factors of the exit ways of venture capital,on this basis,the theoretical model is constructed to study the mechanism of the control right allocation,and the theoretical model is verified through empirical research methods.Secondly,in the process of studying the allocation of control rights,different venture capital exists heterogeneity,there is a big difference between these venture capital in the institutional attributes,investment scale,value-added services,etc.On the basis of this,the theoretical model is built,and research on the mechanism of control right allocation of venture firms under different venture capital,and using the method of data simulation,explain the conclusions of the theoretical model.Finally,theoretical studies have found that,the control right allocation in the process of venture capital exit will affect the venture capital exit ways,on this basis,through the theoretical model and empirical test,study the mechanism of venture capital exit ways.The innovation achievements of this paper are shown as follows:First,based on the incomplete contract and hold-up theory,from the perspective of alleviating bilateral hold-up problem,construct the dynamic control right allocation model of the venture firm,firstly,introducing the bargaining power of entrepreneurs and investors,performance signals and other variables,comparing manager control,contingent control and inverse contingent control allocation,two possible optimal control allocation are identified,under the influence of the various factors,study which kind of control allocation can achieve the maximization of firm value.The study found that,only two control allocations can be optimal,either investor control or contingent control,two kinds of control allocation realize the optimal alternately,according to the relative bargaining power of entrepreneurs,the interim performance signals,the amount of investment,supervision and management costs,the value of the firm liquidation changes.From the perspective of alleviating hold-up problems of the entrepreneurs and investors to study firms control right allocation,it has important value to analyze the right allocation of the venture capital contract,it is also an important supplement to the develop the financial contract,corporate governance and incomplete contract theory.Second,based on incomplete contract,in the framework of the theory of control right allocation,under the condition of the stage investment,the two stage control right allocation model of the firm is constructed,taking into account the different types of venture capital in terms of investment objectives,investment amount,value-added services,there is a big difference,the venture capital are divided into captive venture capital and independent venture capital.Study how to design the contract under the two types of venture capital,to determine the optimal allocation of the control right of the venture firm.The study found that,if the entrepreneur chooses the captive venture capital,no matter entrepreneurs or investors who have control,can produce the same contract parameters and decision-making behavior,achieve a relatively optimal allocation of control rights,if the entrepreneur chooses the independent venture capital,the entrepreneur has control can be relatively superior allocation.Starting from the heterogeneity of the two types of venture capital,research on the control rights allocation,it provides a new research perspective to improve the firm performance,corporate governance and venture capital contract theory.Third,based on incomplete contract and principal agent theory,from the perspective of alleviating the bilateral moral hazard between entrepreneurs and investors,through the introduction of investment,supervision and management cost,effort and effort costs and other variables,construct the theoretical analysis model of the influence of venture firm's control rights allocation on the exit ways of venture capital.Compare entrepreneurs' income,investor income and firm value of manager control,investor control and the contingent control allocation,determine the optimal exit strategy of venture capital under the different control right allocation.The study found that,(i)if the entrepreneur has control,when the firm performance is higher,entrepreneurs will force the venture capitalist to withdraw from the IPO;(ii)if the venture capitalist has the control right,when the firm performance is higher,the venture capitalist will withdraw from the IPO,when the firm performance is lower,the venture capitalist will withdraw from the acquisitions;when the firm performance is in the range of the above two value,venture capitalist will choose to withdraw from the acquisitions,otherwise,the entrepreneur agrees to the venture capitalist to withdraw from the IPO.By studying the impact of the allocation of the control right on the venture capital exit ways,for venture capital to choose the best way to exit,to achieve a successful exit,to obtain higher investment income,as well as to enhance the performance of firm is of great significance.Fourth,on the basis of theoretical research,the paper use Chinese venture capital and venture firm data to do empirical research,reveals the allocation of control rights and its mechanism of influence on venture capital's exit ways,for improving the control right allocation of venture firms,and promoting the successful exit of venture capital is of great practical significance.