ABSTRACT

This chapter discusses the agency problems in the life cycle of typical Private equity (PE) investment. Private equity funds commonly refer to a series of vehicles used in collective investments, all of which are generally themed that the capital is raised privately from qualified investors and is mainly invested in private firms, with the exception of public-to-private funds used in privatizations. On the level of the internal governance of PE funds, limited partnerships are the most widely used legal form in PE and venture capital investments which can provide a more suitable and efficient governance structure. In the process of PE investment under Chinese law, agency costs are generated on two levels, the one is the agency problem between the fund managers and investors and the other is the agency problem between the entrepreneurs and PE shareholders in corporate governance of portfolio companies.