Incomplete Financial Contracts between Venture Capitalist and Entrepreneurs with Asymmetric Information

摘要

This paper applies the framework of incomplete contracts to analyze the problems about the allocation of control rights and the incentives of entrepreneurs. We get the necessary and sufficient conditions on which the optimal action is selected in different allocations of control rights. This paper also explains the reason why contingent controls are commonly used in venture capital corporation .when the corporations' performance become poor, venture capitalists usually get the control rights. When the performances become better, the entrepreneurs usually continue to have control rights.