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Venture firms value analysis: A control rights allocation model

  • School of Management, Harbin Institute of Technology
  • Harbin Institute of Technology Shenzhen
  • Heilongjiang Bureau of China

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

The high risk and asymmetric information in venture investment make the allocation of control rights in venture firms a key to the success of that venture investment. Unlike previous studies, this paper defines the control right as the discrete variables in the zone of [0, 1]. In order to correctly evaluate investment opportunities and reasonably display the characteristics of phased investment, this paper analyzes the value of venture firms by using real options for different control rights allocation tactics. Regarded firm value as a restraint conditions, a decision-making model is established for quantative study on relationships between venture firm value and allocation of control rights. This paper not only provides the basis for venture capitalists and entrepreneurs to allocate control rights at venture firms and make decisions on investment, but also put forwards an evaluating method for venture firm value under different control rights allocation tactics. Computational experience demonstrates the solution process of the control rights allocation model presented in this paper.

Original languageEnglish
Title of host publicationProceedings - ICEBE 2005
Subtitle of host publicationIEEE International Conference on e-Business Engineering
Pages714-721
Number of pages8
DOIs
StatePublished - 2005
Externally publishedYes
EventICEBE 2005: IEEE International Conference on e-Business Engineering - Beijing, China
Duration: 18 Oct 200521 Oct 2005

Publication series

NameProceedings - ICEBE 2005: IEEE International Conference on e-Business Engineering
Volume2005

Conference

ConferenceICEBE 2005: IEEE International Conference on e-Business Engineering
Country/TerritoryChina
CityBeijing
Period18/10/0521/10/05

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