The venture capital financing under a real options framework: case of a high-tech corporation in China

Jingyun Ma and Fengming Song

International Journal of Business and Systems Research, 2008, vol. 2, issue 2, 144-165

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.

Keywords: financial systems engineering; venture capital; real options; high-tech financing; China; high teccnology firms; principal agent; dynamic rights allocation. (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbsre:v:2:y:2008:i:2:p:144-165

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