A Study On Venture Capital Contract Based On Asymmetric Information

Venture capital (VC) has carried out for over half century since its emergence. It has taken the significant action to the industrial application of new and high technologies. As an innovative financial mean, venture capital shows its special characteristic which makes it distinguish from traditional finance. One of the most outstanding character is the agency venture of organization inside caused by asymmetric information. The starting point of research is how to avert moral hazard and adverse selection to decrease agent cost. In this thesis, the author proposes that designing a reasonable VC contract which has incentive & constrain mechanism to make agent cost minimization and VC efficiency maximization is an essential way to solve the problem according to correlation theory of information economics and contract economics. The thesis is divided into six parts: the first part is the introduction. The author gives some information of main view points on VC in home and abroad and the thinking way of the research. The second part sums up VC including its definition and characteristic, especially agency venture of organization inside caused by asymmetric information. The third part analyses the asymmetric information in VC. In this part the information economics and contract economics have been applied to the research of two relationships of principal-agent between investor and venture capitalist, venture capitalist and venture entrepreneur. The fourth part is the emphasis of the article which studies on the main contents of VC contract and its mechanism inside, such as limited partnership, stage investment, the best investment tools and the management in VC backed companies. The fifth part introduces the present situation of VC contract in china and points out some problems which need to been resolved. And the last part takes some advice on how to rationalize the VC contract in china.