Study On The Design Of Venture Capital Contract To Prevent And Control Moral Hazard

Information asymmetry is one of the most outstanding characters in venture capital investment, which will lead to moral hazard after venture entrepreneur accepts the venture capital. Moral hazard can cause many problems which will threaten and impair the benefit of the venture capitalists seriously, for example negative work, excessive consumption on work, misusing capital, excessive investment and so on. How to prevent and control moral hazard is a key to increase the security and efficiency of venture capital, and it's also research object to the venture capitalists and the scholars in the theoretical field.In this paper, we conclude that designing a investment contract is essential to prevent and control moral hazard according to the modern contract theory, and the design mainly contain the design of contract mechanisms and the design of guaranteed item. By the analysis of the factors producing the moral hazard and research on the characters of information asymmetry on the process of the venture capital investment, we can conclude the design approaches of the contact mechanisms, including strengthening the risk resistance of the venture capital, inspiriting the venture entrepreneur by income and the interference of the venture enterprises.The risk resistance of venture capital can be enhanced by designing the kind of venture capital and its investment way. Research shows that information asymmetry and the quality of the project are the main factors that decide the kind of venture capital. On the other hand, stage investment is a better investment way that canreduce the moral hazard and inspirit venture entrepreneur. Meanwhile, based on the analysis of the optional characters of stage investment, we can clarify the selection time of stage investment by exercise the real option theory. Next, after comparing the incentive payment structure with the continuous payment structure and analyzing of the ESO, this paper gives a new inspirit system contained stock ownership and stock option. As to the interference on the venture enterprises, we conclude that interference can be help to prevent and control moral hazard because it can better the condition of information asymmetry. Meanwhile, we analysis the condition of interference and venture capitalists' interfering decisions under various venture capital.