Research On VAM Of PE By Game Theory

VAM(Valuation Adjustment Machanism) is a privateequity investment institutions and the financing agreement signed beforeinvesting------both in a contract for the enterprises in the future, privateequity investment institutions will be able to exercise another right if the conditions ofthe contract appear; enterprises need form another right if not. Therefore, VAM actuallyis a kind of real options. It can protect the interests of private equity investmentinstitutions and the private investors to achieve capital appreciation in the investmentobjective through the design of the terms of agreement on gambling.VAM in foreign countries have been developed for many years. Due to Meng niuDairy and Morgan Stanley on the gambling, the excess growth makes Meng niu companyperformance successfully listed on the Hong Kong stock exchange in recent years. Manydomestic enterprises have to imitate, but by VAM financing way is not suitable for allenterprises. Facts have proved that, many enterprises have failed. Not only did not get thecorresponding development, but some companies bought by rivals. VAM is aneffective way to solve the financing difficulty for our country enterpriseor a business to promote the demise of the accelerator. It becomes the mostconcern now academic problems.VAM for the process to bet on both sides is a game. Therefore, thispaper analyzes the relationship of private investment institutions and the enterprisemanagement strategy from the perspective of game theory. Thus research onthe connotation of VAM reveals the true purpose of VAM terms design. Through theanalysis found that VAM is not a fair agreement and for the two sides to bet is notfair, the agreement to the risk of the enterprise is far greater than the private investors.This paper first introduces the concepts related to gambling on the agreement, thegame theory, and then analyzes the gambling case of our country enterprise and foreignprivate equity investment institutions. Then establish model by game theory, drawing aconclusion that in what circumstances, enterprises should choose to sign VAM to financing, what circumstances should not use this risk financing way. Accordingto the analysis and empirical results, provide the enterprises want finance in future somesuggestions.