The venture capital financing under a real options framework: case of a high-tech corporation in China
by Jingyun Ma, Fengming Song
International Journal of Business and Systems Research (IJBSR), Vol. 2, No. 2, 2008

Abstract: From a financial systems engineering perspective, this paper theoretically analyses the dynamic allocation of rights between the investing and financing sides of the Venture Capital (VC) contract under a real options framework. Based on this systems framework, we further investigate and examine the VC investment of a high-tech corporation in China. In this case, the clauses of the VC financial contracts are interpreted from a principal-agent perspective. The stage financing clauses provide us with nodes for carrying out the real options evaluation by the risk-neutral valuation method and explaining the decision path by dynamic rights allocation analysis.

Online publication date: Sat, 23-Aug-2008

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