An Analysis of Double Moral Hazard Problem Based on Different Retreat Choices in Venture Capital

In order to reveal the connection of equity distribution with retreat system on the part of project investment from the venture capitalists and to further reveal what other factors have been influencing the benefits from the project investment, a double moral hazard model has been designed in the paper concerning venture capitalists and the starting entrepreneurs based on various retreat systems. The conclusion drawn here is equity distribution of the venture capitalists is not only under the influence of efficiency and effort, but also the cooperation and effort form the entrepreneurs, the profit expectation, and the prior probability of various profits. That is, the venture capitalists watch more on the final profit of the entrepreneurs rather than how they retreat.