Influencing Factors and Approaches of Public Capital Income under the Guidance Fund Mode

Abstract

In order to drive private capital to participate in venture capital investment, public capital takes equity as the incentive, to give private capital profit transfer and compensation when making profits and losses respectively. This form has option characteristics, which make the public capital’s income change along with the project value, equity stake negotiation during making profits and losses, and shown its uncertainty. In order to reveal the public capital income and its influencing factors under the guidance fund mode, this paper established the public capital income model under the guidance fund mode, estimated the real option value of the public capital income under the guidance fund mode, and reach a conclusion that when the invested project makes profits, public capital income is only affected by the profit transfer equity share proportion, and if the profit transfer equity is higher, the public capital income will be less; when the invested project suffers losses, public capital income is only affected by the compensation proportion, and if the compensation proportion is higher, the public capital income will be less. When the invested project makes profits, and public capital transferred equity stake proportion is less than compensated equity stake proportion, then the income public capital get will always higher than that under making losses condition; and when the invested project makes profits, and the public capital equity stake transferred profit is more than compensated equity stake proportion, the public capital income will be higher than that in making losses condition only when the invested project value is higher than a certain threshold value; and when the invested project suffers losses, and the public capital transferred profit is more than compensated proportion, the income that public capital get will be higher than that in making profit condition only when invested project value is higher than another threshold value. Finally, this paper will further verify this conclusion according to related numerical simulation.