| In the era of knowledge economy, the importance of start-ups and venture capital appear more and more prominent. People become to pay attention to the governance mechanism of venture enterprises. Highly uncertainty and information asymmetry are the main features of venture enterprises, and their governance problems are quite different from the traditional ones. Both the efforts of the entrepreneur and venture capitalists are indispensable to the success of the enterprise, and during the process of their cooperation, there exists double moral hazard problems, which determines that the governance mechanism should be different. This paper starts from the study of financial instruments, combining with the analysis of the feature of risk and the allocation of cash-flow rights and control rights in venture enterprises. Besides, I will introduce the usage of convertible securities, and base the whole paper of governance mechanism on it. In chapter 2, I analyze the moral hazard problems inside venture enterprises, and make a general introduction of the financing contract models based on agency theory. I will discuss that convertible securities are the best governance instruments. In chapter 3, under the structure of incomplete contract theory, I will establish a model to explain clearly the trade-off inside the contingent allocation of control rights. In chapter 4,I will introduce the mechanism of staged financing, and discuss the governance effect of convertible securities against strategic behaviors. In chapter 5,I establish a model with double moral hazard to explain the governance efficiency of the combinations of cash-flow incentives from convertible securities and contingent control. To sum up, this paper analyzes the governance mechanism of venture enterprises from comprehensive aspects, and attempts to make security design as a solution, which is considered to be consistent with the results of some empirical studies. |
