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

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  • Jingyun Ma
  • Fengming Song

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.

Suggested Citation

  • Jingyun Ma & Fengming Song, 2008. "The venture capital financing under a real options framework: case of a high-tech corporation in China," International Journal of Business and Systems Research, Inderscience Enterprises Ltd, vol. 2(2), pages 144-165.
    • Handle: RePEc:ids:ijbsre:v:2:y:2008:i:2:p:144-165
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