ABSTRACT
Since the mid-1980s, private equity (PE) investment has been playing an increasingly significant role in supporting corporate finance in the Chinese economy for more than three decades. The agency problems in private equity (PE) transactions exist on two levels. On the one hand, compared with traditional financing approaches, private equity is a kind of expensive financing sources, which mainly invest in the companies having difficulties to access bank loans or public capital market due to their high risk. In a typical corporate governance model of PE-held corporations, PE funds will involve in corporate governance in two levels. Firstly, as the majority shareholders, the entrepreneurs are usually able to dominate the general meeting, therefore, the private equity and venture capital investors as minority shareholders might be oppressed. Secondly, it is quite common that the entrepreneurs or founders of start-ups or private companies are also nominated as the CEO or the president of the board.
