Research On The Mechanism Of The Impact Of Venture Capital On Company Valuation

With the economic development in China,there is increasing attention to risk investment as a new way to invest.Compared to traditional financing methods,risk investment has specific advantages.For enterprises,financing is a difficult problem they have faced since the beginning of their establishment.The emergence of venture capital can directly help enterprises solve their funding problems.However,for enterprises,the non capital value-added services provided by venture capital are the key to their sustainable development.Risk capital can provide value-added services such as improving ownership structure,providing supervision and governance services,and sharing technological innovation risks.The sustainable development of Chinese companies necessitates risk investment,which is a major factor in the nation’s economic growth.However,the current research direction in academia is mostly empirical research that explores the correlation between venture capital and company valuation,while research that explores the specific mechanism of the two in the form of cases is relatively insufficient.Examining the theoretical and practical implications of risk investments in the valuation of companies is thus sensible.This article takes Haimu Star,a laser and automation industry company listed on the Science and Technology Innovation Edition,as a case study company.The literature on risk investments,the valuation of enterprises and the relationship between them are analysed on the basis of the principal-agent theory and the theory of stakeholders;Next,a brief introduction is given to the case company,explaining the process and motivation of introducing venture capital into the case company.Then,combined with a specific case company,Haimu Star,an analysis is made of three mechanisms.Venture capital institutions can first optimize the equity structure through the use of an equity structure mechanism,thereby diminishing the equity concentration and equity balance of the enterprise,while also providing a strong constraint on majorshareholders and safeguarding the interests of small and medium-sized shareholders,which in turn has an effect on the company’s valuation;Secondly,it is essential to be able to control through governance mechanisms,optimizing the equity structure.The board of directors and supervisors’ structure,an operational system and mechanism,and the independence of the company’s administrative or management institutions are all to be bolstered.The risk sharing mechanism can be employed to reduce the innovation risks of enterprises,augment their technological innovation aptitude,and spur the enhancement of corporate value;Finally,the risk sharing mechanism can help reduce the innovation risks of enterprises,enhance their technological innovation capabilities,and provide impetus for the improvement of corporate valuation.The analysis of the three mechanisms has led to the conclusion that venture capital can enhance the equity and governance structure,bolster supervision and management,share risks,and boost the company’s valuation.Consequently,proposals for the government,venture capital institutions,and enterprises to further development have been proposed in light of these conclusions.