Research On The Adverse Selection Of Venture Capical Firms In Syndication

The most typical features of venture capital are high risk,high growth and high return.High risk is obviously,high returns may be not, it is only higher expected returns.Because of risk investment benefit uncertainty and information asymmetry, more venture capital firms apply joint investment strategy to effectively reduce the investment risk.In view of this, effective joint investment by venture capital company is indispensable,which requires the research on the problems of joint investment by risk capital.This paper mainly studies the adverse selection of venture capital caused by information asymmetry in the joint investment.Based on the introduction of venture capital jiont investment,the paper points out that the participants of joint venture investment are leading venture capital firms and following venture capital firms. By analyzing the reasons leading adverse selection in joint venture caused by information asymmetry between investment companies,the paper proposed methods to prevent adverse selection in such problem.First is the use of signal transduction mechanisms. Through the following venture capital firms, By tracing the signal and information of capability of venture inveatment companies delivered to the leading venture capital firms,AHP and fuzzy evaluation method are applied to make a preliminary judging. Second, by information screening mechanism, investment return moedel based on firm capability and model of optimal ownership arrangements amnong venture capital firms are constructed. Then, return of investment and contribution level match the capability of venture capital firm can be attained. Hence, the capability of following venture capital firms can be identified.This study explores the joint venture strategy by investment venture capital firms, and provides useful information for decision making.