Study on the Incentive Model of Subsection Investment to Prevent and Control Moral Hazard Based on Venture Capital

Information asymmetry is one of the most important characteristics of venture capital. In the system of venture capital, information asymmetry between venture capitalist and entrepreneur can lead to the serious moral hazard which will harm the benefit of the venture capitalist. How to prevent and control the moral hazard is a significant subject to both the venture capitalists and the academic circle. In this paper, after analyzing the process of venture capital and researching the game between venture capitalist and entrepreneur, we establish the models of subsection investment in two circumstances, and get several meaningful results by comparing them with the model of upfront financing.