Study On Governance Mechanism Of Venture Capital

In China,venture capital has been growing over 20 years though,it still at its infancy course due to its root cause of lacking in-depth understanding of venture capital mechanism. This paper focused on the endogenetic governance mechanism of venture capital. and the exogenous govenance mechanism of venture capital. The behavior of investment and finance in venture capital involves the dual principal-agent relationships. There is the relationship between investors and venture capitalists and the relationship between venture capitalists and entrepreneurs,which is described by a branch of the theories of the neo-institutional economics. symmetric information is the most important characteristic of venture capital. Designing a set of contract theory in order to control the risk produced by asymmetric information effectivly is the key of venture capital endogenetic governance mechanism. This paper dissertats the asymmetric information theoy and contract theory. . First,the study on contracts of venture investers and venture capitalists. Limited paltnership suits the characteristics of incomplete contract of the venture capital transaction. Its govemance structure solves the problems of agency costs,incentive and restriction between investors and venture capitalists. Second,the study on contracts of venture capitalists and entrepreneurs. Venture capitalists adopt some contracts such as multi-stage investment,security design and reward inspiration mechanism to avoid the risk of entrepreneurs. After theory anaiyzing,the paper draws some abbreviated conclusions. The paper discusses the exogenous govenance mechanism of venture capital. After theory anaiyzing,the paper maked empirical analysis on government policy design of China venture capital,and proposed suggestive strategies to promote the development of venture capital in China.