A Study Of The Prevention Mechanism Of Moral Hazard In Start-up Enterprises

The report of the 19 th CPC National Congress pointed out that "innovation is the first driving force for development and the strategic support for building a modern economic system." it is necessary to "speed up the construction of an innovative country" and "stimulate and protect entrepreneurship." encourage more social subjects to engage in innovation and entrepreneurship.The report of the 20 th CPC National Congress further emphasizes the need to "improve the security system for promoting entrepreneurship and promoting employment,and support and standardize the development of new forms of employment." Enterprises are the micro main body of innovation and entrepreneurship.Under the background of "mass entrepreneurship and mass innovation",the wave of entrepreneurship is rising,which makes entrepreneurial enterprises play a vital role in promoting economic growth and scientific and technological progress,creating jobs and so on.However,limited by the limited resources owned by the start-up enterprises,the low degree of embedding in the business environment,and the awareness of compliance that needs to be improved,enterprises inevitably face a high degree of uncertainty and information asymmetry in the start-up period.This kind of information asymmetry can easily cause moral hazard and damage the interests of venture investors.due to the uncertainty highlighted by the start-up enterprises themselves,the results will be further magnified.The governance mechanism of start-up enterprises is an important guarantee for the sound development of venture capital.Imperfect governance mechanism will inevitably reduce the expected return of venture capital and improve the risk of venture capital.The lack of restraint mechanism will inevitably lead to the distortion of venture capital behavior,the frequent opportunistic tendency of senior managers will eventually lead to the failure of venture capital,and the lack of dynamic adjustment of incentive mechanism will greatly dampen the creativity and enthusiasm of entrepreneurial entrepreneurs,which is not conducive to the healthy growth of entrepreneurial enterprises.For this reason,it is necessary to improve the effectiveness of internal control of start-up enterprises,optimize the internal governance mechanism of start-up enterprises,and effectively avoid the moral hazard caused by information asymmetry between principals and agents.In view of this,based on a systematic review of the relevant literature on corporate moral hazard and its governance mechanism,this paper intends to scientifically identify the source and formation mechanism of moral hazard in start-up enterprises,design effective restraint mechanism and incentive mechanism of moral hazard in start-up enterprises.First of all,by combining the agency theory and the housekeeper theory,through the comparative analysis of the human nature hypothesis of "economic man" and "social man",the human nature hypothesis of "effect man" is put forward,and the complex behavior model of agent is constructed based on the general behavior model.this paper analyzes the game relationship between principal and agent behavior choice under the hypothesis of "utility man".Then,the opportunism and transaction cost are introduced into the principal-agent model to construct the principal-agent model of the moral hazard of start-up enterprises.this paper analyzes the moral hazard of start-up enterprises under the two cases of non-conflict and conflict of interest distribution of interests and the moral hazard of start-up enterprises under two kinds of power distribution of non-collusion and collusion of agents.This paper discusses the effect and function boundary of the moral hazard governance mechanism of start-up enterprises from four aspects of supervision,guarantee,supervision and trust,and carries on the numerical simulation of the moral hazard of start-up enterprises under different situations.Based on this,this paper constructs the restraint mechanism and incentive mechanism for the prevention of moral hazard in start-up enterprises,and uses the data of listed companies on China’s growth Enterprise Market to conduct an empirical test.The innovations of this paper are as follows: First,based on the hypothesis of "utility man",the principal-agent analysis framework of moral hazard in start-up enterprises is constructed.Based on the hypothesis of "utility man",this paper theoretically constructs a more realistic framework for the governance of moral hazard in start-up enterprises,which is not limited to the analysis of the causes and governance measures of moral hazard in start-up enterprises.more emphasis is placed on the abstract analysis of the essence and hierarchical characteristics of the moral hazard contract in start-up enterprises,and the general model is extended according to the different situations of principal benefit distribution and agent power distribution.Second,break through the path dependence from reality to theory and creatively follow the logic from theory to reality.Through the construction of agent complex behavior model and multiple principal-agent theory analysis framework to analyze the causes and governance mechanism of moral hazard in start-up enterprises,and then according to the theoretical analysis conclusions combined with empirical data to demonstrate the governance of moral hazard in start-up enterprises;Third,the diversified principal-agent relationship of start-up enterprises is brought into the analysis framework,which expands the application scope of a single standardized principal-agent model.This paper probes into the restraint mechanism of moral hazard prevention in start-up enterprises,introduces the difference of market structure into the basic model of surplus right allocation,and discusses the optimal contract design of start-up enterprises,and further analyzes the optimal contract design of start-up enterprises in the case of entrepreneur’s private income and capitalist’s right of control,which breaks through the one-sidedness of the classical principal-agent model which only pays attention to the relationship between transaction subjects with single behavior attribute.At the same time,this paper also constructs the incentive contract model of start-up enterprises,and discusses the agent incentive problem under moral hazard and the agent incentive problem with mortgage.to some extent,it is also the extended application of principal-agent theory.Based on the above analysis,the main conclusions are as follows:First,in the analysis of agent behavior choice: based on the "economic man" hypothesis of agency theory and the "social man" hypothesis of housekeeper theory,the "utility man" hypothesis is put forward and incorporated into the traditional general behavior model to construct the agent complex behavior model.The factors that affect the agent behavior choice are analyzed,and it is found that the agent’s demand level and the company’s institutional environment are the two major factors that affect the agent’s behavior.Information feedback and motivation choice provide intermediary bridge services for the agent’s behavior choice,and together determine the agent’s behavior choice.Second,in terms of the moral hazard situation and governance mechanism of start-up enterprises:First of all,from the perspective of the moral hazard of start-up enterprises under the distribution of principal interests,the tendency of agents to produce opportunism is smaller when the scale returns are increasing than when the scale returns are decreasing.The principal’s participation constraint is easier to be satisfied in enterprises with increasing scale returns than in enterprises with decreasing scale returns.In the case of principal decision-making,when there is a conflict of interest between the principal,it is easier to meet the incentive compatibility constraints of the manager in the era when there is no conflict of interest,and the agent is less likely to choose opportunistic behavior.Secondly,from the perspective of the moral hazard of start-up enterprises under the distribution of agent power,when agents do not collude,the possibility of agents supervising each other is higher in enterprises with increasing scale returns than in enterprises with decreasing scale returns.When agents collude,whether agents collude or not is affected by the current distribution proportion of agent income with more power.the greater the proportion of current distribution,the lower the possibility of agent collusion.And the enterprise scale effect will also affect the collusion behavior between agents,and the probability of agent collusion in enterprises with increasing scale returns is lower than that in enterprises with decreasing scale returns.Finally,from the effect and function boundary of the start-up enterprise moral hazard governance mechanism,(1)for the supervision mechanism,if the supervision cost is shared by the client,the client’s willingness to invest in the start-up enterprise will be enhanced.If the supervision cost is not apportioned,the capital injection probability of the "hitchhiker" client will not be reduced,but if we want to ensure that the investment probability of the client who bears the supervision cost will not be reduced,the effect of supervision must be obvious enough;(2)for the guarantee mechanism,only when the guarantee behavior is fully effective,that is,the expected income of the client is greatly reduced,the agent will tend to work hard continuously.(3)for the regulatory mechanism,if the cost of external supervision is borne by the agent,external supervision can not only increase the probability of principal investment,but also reduce the probability of agent opportunistic behavior.If the cost of external supervision is borne by the enterprise,when the effect of external supervision is poor,the investment enthusiasm of the principal may decrease,and the possibility of the agent’s efforts may not necessarily increase.(4)for the trust mechanism,only when the trust mechanism fully restricts the agent,the investment enthusiasm of the principal can be improved.Only when the price paid by the agent to maintain trust is high enough,the likelihood of the agent’s efforts will be significantly increased.Third,in the restraint mechanism of moral hazard prevention of start-up enterprises:on the one hand,from the perspective of the optimal residual right allocation of start-up enterprises,when the investment of start-up investors is less,in order to get more investment,the design of contract III must include incentives for start-up investors.Through this contract,venture investors can get a higher proportion of the remaining share when the enterprise is successful,which will encourage them to make greater efforts in the operation of the enterprise.When venture capitalists invest more,they need more remaining share of the enterprise to recover their investment.Entrepreneurs get less business surplus,so the contract must include incentive terms for entrepreneurs.On the other hand,from the perspective of the impact of entrepreneurial control on the residual allocation,when there is entrepreneur private income,the entrepreneur private income reduces the expected return of venture investors.And the business success rate is inversely proportional to the entrepreneur’s controllable private income.The higher the controllable private income is,the lower the enterprise success rate is,the lower the expected return of the venture investor is,and the less the venture investor invests.When the venture investor has the control,under the condition of multi-stage financing and liquidation right,the difference between the benefit of the venture investor after the start-up success and the business failure in the optimal contract is obviously larger than that of the one-time financing of the venture investor,and the difference of the return of the entrepreneur from different business results is significantly reduced.Fourth,in terms of the incentive mechanism for the prevention of moral hazard in start-up enterprises: on the one hand,from the perspective of the incentive problem of agents under moral hazard,the incentive coefficient of agents with moral hazard is greater than that of agents without moral hazard,and the degree of effort of agents is proportional to the incentive coefficient.Only by increasing the incentive coefficient can we prevent the moral hazard of agents.On the other hand,from the perspective of the incentive of the mortgaged agent,the mortgage value of the agent is directly proportional to the effort of the agent,and inversely proportional to the income of the principal.when other conditions remain unchanged,the improvement of the mortgage value of the agent will improve the level of effort of the agent to the business operation,and the improvement of the income of the principal will reduce the payment of the agent to the operation of the enterprise.