Research On Two Layers Of Principal-agent In Venture Capital

The venture capital is one of the most important financing channels, solving the financing dilemma of young high-tech firm. As the venture capital involve in three participants, namely common investors, venture capitalists, and young high-tech firm entrepreneurs, it appears that in any operation stage of venture capital conclude two layer of principal-agent relation, the first layer comes into being between common investors and capitalists, and the second layer between venture capitalists and young high-tech firm entrepreneurs. Under the mechanism of two-layer principal-agent, the speciality of venture capital and the uncertainty of high-tech result in the serious information asymmetry, and increase the agent cost. Consequently, this paper based on information economics theory, by using game theory and Holmostrom-tirole model, studying in three aspects: firstly, Analyzing the first layer of principal-agent ,namely the adverse selection and moral hazard between investors and venture capitalists; secondly, Analyzing the second layer of principal-agent ,namely the adverse selection and moral hazard between venture capitalists and entrepreneurs; lastly, considering the two-layer principal-agent synthetically, mainly analyzing venture capitalists collude with entrepreneurs to detriment of investors. And this paper proposes some suggestion to solve each problem based on analysis.