Research On Moral Hazard Of Staged Financing In Venture Capital

Being a new investment model, venture capital is put by professional financiers into enterprise which is developing rapidly and high returns prospects. Professional financiers not only offer venture capital, but provide long-term equity investment and value-added service in order to achieve high returns in the method of exit after the invested company become relatively mature. Current researches of venture capital are mainly conducted from a macro perspective but a micro-operating view in China. Therefore, carrying on further investigation on venture capital, we can have realistic theory meaning and practical meaning.Venture capitalists prefer staged financing that can reduce the risk of investment and control moral hazard from entrepreneurs. The theory research of staged financing is not enough despite it has been widely used in practice. By making a comprehensive survey about the recent researches about moral hazard in venture capital, we can find that most of the researches concentrate on upfront financing, which, to a certain extent, has restricted the rapid development of staged financing of our country. In view of this, I select venture capitalists how to control moral hazard under staged financing as research object of the thesis. And, we consider an equity incentive model under staged financing using principal-agent theory and mechanisms theory of venture capital. Using parametric functions and comparing symmetrical information with asymmetric information, we discover a few interesting properties of staged financing. Furthermore, we consider the optimal designing of equity structure under the effort level that an entrepreneur chooses stage by stage. By comparing the effort level that the entrepreneur chooses stage by stage with one-time injection of effort level of the two-stage, and combining with numerical calculation, it reaches the conclusion that under the former condition, society welfare have been largely improved., which can further supplement theory system of venture capital.The general objects of venture capital are growing and innovative companies whose one remarkable character is increase as a nonlinear. The equity incentive model has fully taken this character. Its importance lies in the change of assumptions that income function is linear in previous studies. This equity incentive model could provide reference for the investment decisions of participation in venture capita, which is of great practical significance in guiding practices.