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The Study Of Principal-agent In Venture Capital

Posted on:2006-01-03Degree:MasterType:Thesis
Country:ChinaCandidate:L H YangFull Text:PDF
GTID:2156360152470293Subject:Political economy
Abstract/Summary:PDF Full Text Request
The existence and development of venture capital have done great contribution to the steady and rapid increase of the new economy in the world. In venture capital, there are full of heavy gain, but in the same, there are traps of loss anywhere. So the first problem is how to control and decrease the risk and enlarge the interests.Asymmetric information leads to agency risk. Agency risk includes two forms: adverse and moral risk. When venture capitalists (venture capital organizations) decide to take part in this activity, the ability of the entrepreneur and the quality of the item can't be known to the venture capitalists, so the adverse selection happens unavoidably. In favor of the venture capitalists, firstly we discuss the existence and the harm of the adverse selection, secondly we devise models of how to attract and select excellent entrepreneur, and receive the revelation: applying the screening model to alleviate entrepreneur's adverse selection, venture capitalists should provide some standard contracts including different residual claimant and control power to attract and select the real excellence entrepreneur.After investing, the entrepreneur not only possesses the technology that determines the success of the enterprise, but also operates and administrates the enterprise. The asymmetric information problems are also very serious. The entrepreneur can take advantage of the asymmetric information to impair the interest of the venture capitalist. The moral hazards appear according. We discuss the emergence and the harm of moral hazards. The paper describes and comments on the Jeffery Trester model and devise dynamic investing model, through analysis of the model, the paper receives the revelations: first, in the early period of investing, the venture capitalists should adopt the prior stock as the investing tools. Second, venture capitalists should invest step by step.In the end, on the basis of the principal-agent study of the venture capital, the paper makes some suggestions on how to control and decrease the adverse selection and moral hazard of the entrepreneur.
Keywords/Search Tags:Venture capital, Principal-agent, Adverse selection, Moral hazard
PDF Full Text Request
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