Contractual Relationship Of The Risk Of Investment Research

In venture capital, high uncertainty and information asymmetry lead to grave agency problem and moral hazard. Because of the existence of the bounded rationality and transaction cost, all of the contracts for the venture capital are incomplete, and it is the purpose of this paper that how to design one mechanism that can stimulate and restrict all the participants and promote the transaction efficiency.Begin with literature reviews, this paper compiles the foreign and domestic academic accomplishments of the contract relation study for venture capital, then classifies the development of contract theory into three phrases, that is, the classic, new classic, and modern contract theories, and narrates the complete and incomplete financial contract theories. This paper also demonstrates the necessity of contract mechanism design, along with the definition, the principal-agent and the contract relationship in the venture capital investment. Via the review, the writer tries to establish a theory framework for the study of the whole paper.The main body of the paper lies in studying the mechanism of the four layers of contract relations in the venture capital investment. The limited partnership solves the principal-agent problem between the venture investor and venture capitalist. The venture capitalist eliminates the adverse selection for the venture entrepreneurs, and reduces the moral hazard and agent cost, through multi-stage investment, scientific investment instruments, contingent corporate governance and control transfer, rewards geared to the valuation creation of the venture enterprise and efficient exit measures.In order to disperse risk, accumulate resources and increase the investment returns, the venture capitalist employs more and more syndications in investment practice. If the relation between the venture capitalist and the professional service providers is mishandled, the chain of principal-agent will be elongated and the agent cost will be higher. The writer studies the four lays of contract relation as a whole body.After the theory analysis, this paper makes empirical analysis, which uses the foreign empirical study results and two local venture capital investment cases to verify the theory analysis above. Finally, the paper infers brief conclusion enlightenment.The unique place of the paper lies in that, pointing out and studying the relation between the capitalists and that between the capitalist and the service provider in local venture capital practice. And the paper also studies all the contract relations in venture capital investment as a whole. This paper uses one local classic venture capital investment case to verify the theory, and introduces another local venture capital investment case that is unsuccessful, and involved by the writer himself to discover and analyze all kinds of questions by the local venture capitalist in local practice.