Research On The Risk And Preventive Measures Of Valuation Adjustment Mechanism In Private Equity Financing

Private equity investment has been produced and gradually popular in the West since the 80s,and is a new type of enterprise equity investment that was born with economic development,which refers to private equity investment institutions to inject capital into potential enterprises or to invest in their equity.Private equity investment has been expanding in recent years with the characteristics of flexible method,strong maneuverability and high return on investment.From the investor's point of view,the main motivation of private equity investment is that private equity investment can achieve the purpose of income through private negotiation and investment with the financier.And the valuation adjustment mechanism(abbreviation:VAM)is accompanied by the development of private equity investment resulting in the valuation adjustment mechanism,in the previous study of the VAM has summed up the theoretical origin,characteristics and application of the VAM,is the investor in order to prevent overvaluation and protect their own interests set up protection mechanism.However,some scholars have counted the previous cases of the VAM,found that the failure rate of the VAM reached 63%,the failure of gambling has become the norm in the equity financing market.Even under the protection of the VAM,the investor still has to face the risk that the return will not meet the expectations,the performance compensation can not be cashed,the financier defaults and so on.Therefore,this article from the investor's point of view,the private equity investment in the use of the VAM when the risk identification and prevention and control research.In this paper,case analysis method is used to study the risk prevention of the VAM and to construct risk prevention and control system.This paper selects the domestic PE organization"TOP1" Jiuding Capital take the VAM with Jiudian pharmaceutical,Chetou pharmaceutical and Panlong pharmaceutical's case Risk analysis,these cases'Results are successful or Failed,and one of them had legal disputes,covering the VAM before,during and after three stages.I collects detailed information about the VAM and the financial data for the VAM's period,analyzes the risks existing in the use of the Jiuding Capital to the VAM,such as earnings management risk,single performance index risk,moral hazard and other 8 risks,according to the terms and conditions of the VAM,and expounds how to deal with the risk in the case,and the effectiveness of Jiuding Capital risk countermeasure is analyzed according to the result of the incident.Finally,the integration of Jiuding Capital in three of the risk problems in VAM's cases and Jiuding Capital countermeasures,put forward the risk of Jiuding Capital neglect and prevention of the link,as well as the failure to adopt the response measures,the construction of a new VAM risk prevention and control system,in accordance with the before,middle and after three stages to supplement the risk response measures,Including the improvement of prior due diligence,the design of multiple performance indicators,the use of repeated games,the establishment of reward and punishment mechanism,judicial means,in a phased way to improve the risk prevention and control system.