Study On Angel Investment Optimal Contract

Since the 19 th National Congress of the People's Republic of China,the Chinese economy has been pursuing high-quality development.Stabilizing and seeking progress has become an important principle in governing the country.Under the guidance of this principle,China has proposed the optimization and upgrading of traditional industries for cultivating new economic growth points.However,the upgrading of traditional industries requires the stimulation of emerging industries,and new economic growth points need innovation and entrepreneurship to promote the prosperity of the real economy.In this context,the state puts forward the policy slogan of "mass entrepreneurship and innovation" to provide a suitable development environment for China's innovation and entrepreneurship enterprises.With the implementation of the "Chance & Change" policy,China has launched an upsurge of innovation,while angel investment,which provides financial support for start-ups,is also entering the golden stage of development.With the rapid development of angel investment in our country,more and more problems have begun to emerge.The root of its appearance lies in the asymmetry information.The entrepreneurs conceal the real situation of the project and lead to angel investors to fail to select suitable projects,and the problem will be resolved through training of angel select project ability;and the inaccessibility of entrepreneurial work efforts and other information will lead to more serious cooperation barriers between entrepreneurs and angel investors.The agency problem has affected the design of angel investment financing contracts and has become a difficult problem that hinders the development of angel investment in our country.In the process of collating domestic and foreign research literature,we found that moral compensation plays a major role in solving moral hazard in angel investment.Therefore,we combine the characteristics of angel investment,define the utility of moral compensation,and discover the possibility and feasibility of its existence.There is a value of theoretical application and practical application.On the basic of the utility of moral compensation,we construct a theoretical model based on principal-agent theory,and find out the optimal financing scale of angel investment and the optimal proportion of equity allocation.The results derived by our model indicate that the optimal scale of angel investment and the share allocation ratio do exist,which could alleviate the moral hazard of the entrepreneur.When the moral hazard problem is getting serious,both the scale of investment and the share ratio of the angel investor decrease.While for the high-quality entrepreneurial project,the scale of investment and the share ration of the angel investor increase.Moreover,the excellent entrepreneurial experience could enhance the optimal scale of investment but reduce the share ratio.Thus,this paper could provide a better explanation of the angel investment behavior.In the fourth chapter,we use the hypothetical case to introduce the actual operation of the optimal contract,and put forward the relevant recommendations for the practical application of the optimal contract.We combine the contents of the full text at the end of the article,propose relevant policy recommendations for entrepreneurs,angel investors and industry associations,and set out the deficiencies in this paper to propose specific directions for angel investment research in the future.