Study on Private Equity Investment Risk Avoiding Base on Principle-Agent

This paper analyzed the asymmetric information between private equity firm and entrepreneurs. uses the approaches and models of game theory to analyze principal-agent problem between private equity firm and entrepreneurs. Find the higher risk aversion attitude will lead to lower incentive intensity to entrepreneurs under the fixed distribution proportion. The return of private equity firm is the decreasing function of portfolio firm entrepreneurial risk aversion attitude. The lower entrepreneurial risk aversion attitude will lead to higher return to private equity firm. The return of private equity firm also is impacted by environment. The greater volatility of environment factors will lead to lower return to private equity firm.