Study On The Financing Mechanism Of The Innovative Enterprises

As a great choice to deal with the challenges in future, China's independent innovation strategy is the soul and the main line to guide the future development, and is the fundamental action to build an innovation-oriented country also. Enterprises are the mainstay of independent innovation, and innovative enterprises are extremely active force. So, how to promote the growth of innovative enterprises is an important subject faced. The chief problems in the innovative enterprises is to solve financing of innovative enterprises, how to set up the capital market, how to design the mechanism, which is to be thought about under the condition that China's markets and the mechanism is not very sound. Incomplete contract theory as an important research framework about financing mechanism design in recent years, which provide a more micro perspective to help us to understand this issue, it is a powerful tool to deal with the complex, complicated and full of contradictions macroeconomic policy for analysis.In the first chapter, namely the introduction, the main character of innovative enterprises and innovative corporate finance contractual relationship was defined. The selected standard of China's current innovative enterprises experiment still trapped in traditional arrangement, and depends on government policy support; the majority of these enterprises is already listed companies, but is a higher level of technical content, or engaging in high technology industries and really in a growth of high-tech innovative enterprises is difficult to be selected. Nowadays, innovative enterprises experiments, mainly focus on the national strategic perspective of the overall situation, cling to evaluation studies. The problem stressed in this paper stress, that is the development of innovative enterprises, the existing innovation, and then the enterprise, that is promote innovative become enterprises. In essence, it more inclined to venture capital financing. The innovative enterprises financing primarily located in entrepreneurs'contractual relationship: creditors and entrepreneur, as well as venture capitalists and entrepreneur.The contracts construction of enterprises financing contained in Chapter II. Incomplete Contract is due to bounded rationality, the complexity of the external environment, uncertainty, information asymmetries and incomplete, the parties or the third party could not confirm or observe all provisions of a contract is not completely, so design different mechanism to deal with the incompletion, in addition to treat with the problems triggered the uncertainty associated with the contract terms. Incomplete Contract will bring three costs: unforeseen contingencies, cost of writing contracts, and cost of enforcing contracts. Incomplete Contract Theory is an important methodology, it even more concerned about corporate control of the micro-structure and dynamics, and it is closer to the truth of the matter, more microscopic.As incomplete contract theoretical study of characteristics, makes the study of enterprises financing and corporate governance issues closely integrated. Corporate governance usually regards the financing of enterprises as an established condition, accustomed to the basic principles of corporate governance to remedy existing corporate governance structure deficiencies. In fact, an enterprise financing contract written, the control structure and withdraw term will be defined in certain period, which is the foundation and starting point of corporate governance. Therefore, there will be clear meaning of corporate governance, that to study enterprises financing form incomplete contract theory perspective. Chapter III is most important in the paper. It focuses on the control rights collocation, stage financing and related issues in the innovative enterprise financing contract. Because of the incompletion of financing contract, control rights collocation is an important variable related to enterprise performance and financing contract Aghion, P. and P. Bolton (1992) has been established a"state-contingent control rights"model in the incomplete contract framework. Dewatripoint & Tirole (1994) enriched and expanded the scope of control rights allocation, the diversity of the securities, the interrelationship of securities control and revenue streams are studied; the local consistency of policy options, currency gains and the management of low-level interventions between the management and shareholders were referred also. Kirilenko, A.A (2001) treated control rights as a continuous variable, mainly on the control rights continuous allocation between the entrepreneurs and venture capitalists. The other important issue is stage financing in innovative enterprise financing contract. Admati, A.R and Pfleiderer, P (1994) designed a financing contract, which ensures that entrepreneurs and investors realize the advantages of the internal financing, and to reduce its inferiority, in order to obtain the optimal solution for the goal of the investment decision-making. Gompers (1995) focused on the cost control of the venture capital. He deemed that the stage financing provide better information gathering and monitoring conditions for the venture capitalists, and to ensure its liquidation of the project. Neher (1999) researched the optimal stage investment path from the perspective of agency costs, and discussed the relationship between stage financing and the various attributes of venture capital. Cornelli and Yosha (2003) studied from more micro perspective; mechanism design is the more prominent specific, mainly inspected convertible securities,"window dressing"discussed in the model have very important academic significance. Based on the above studies, this paper builds a control rights model in the condition of stage financing. The model focuses on the equity financing and debt financing. In equity financing circumstances, the risks of the entrepreneur's control rights transfer of associated with the stage performance is a negative correlation; the stage financing provide an enhanced control mechanism to stimulate the entrepreneurs to operate signal. When in the stage financing, venture capitalists should pay attention to screen enterprises signal. In the debt financing, creditors should make use of financing tools, reduce the damage of signal operated by entrepreneurs; As long as the creditor commitment to provide stage financing, liquidation is difficult to achieve, and the creditors were unable to control enterprises.Capital exists is the subject of the chapter IV. The capital how to exist is very important issue in financing contract. Venture capital is the main tool in early innovative enterprises (seed period and start-up period). There are three exist channels, which are initial public offering (IPO), stock transfer, and liquidation. Different channel have different effect on enterprises financing. Based on the theoretical research, the chapter V does an evidence research from China's innovative enterprises. At present, there are 287 enterprises as innovative pilot enterprises in China. These enterprises are mainly located in developed provinces, mainly in machinery manufacturing, chemical engineering (with new material), bio-pharmaceutical, IT, the metallurgical industry (including iron and steel, non-ferrous metals smelting), but they are generally above listed companies. It is different from this paper advocated. Venture capital as the main channel for innovative enterprises financing in China, the importance is obvious.By the end of 2007, there was 21.324 billion US dollars as venture capital, which is managed by venture capital institutions in Chinese mainland, and 68.3% of funds were controlled by foreign venture capital. These funds invest mainly in the developed provinces of the Internet, the IT industry, medical and health, energy, chain operations and the media and entertainment industries. With the rapid development of venture capital investment, relevant laws and regulations will be made in China. Small-mid enterprise( SME) board and the Growth Enterprise Market(GEM) has become (or soon will be) for innovative enterprises to provide an important platform for financing, and is currently in a phase of rapid development, of course, is also faced with many problems to be solved.After a detailed study on the financing contract theory, the status quo of innovative enterprises, as well as its required venture capital investment, the development of GEM market in china were be summarized. The paper deems that the current China innovative financing mechanisms contain following problems: the difficulties of achieving quality and structure equilibrium of both contractual parties, the unsoundness of third party by contract, the deficiency of mature corporate governance as well as the imbalance areas of entrepreneurial atmosphere. To solve these problems, we should make more efforts on the government investment mechanism and channels, capital market construction and improve relevant laws and regulations.The main innovation of this paper embodied in two aspects: First, the paper builds a control rights model in the condition of stage financing. Secondly, based on the innovative enterprises experiment, the paper deems that research angle and the policy orientation about the innovative enterprises should be modified.