Private equity market structure based on Shapley value

NI Xuanming, QIU Yuning, ZHAO Huimin, SUN Huixia

Systems Engineering - Theory & Practice ›› 2022, Vol. 42 ›› Issue (4) : 923-936.

PDF(887 KB)
PDF(887 KB)
Systems Engineering - Theory & Practice ›› 2022, Vol. 42 ›› Issue (4) : 923-936. DOI: 10.12011/SETP2021-2390

Private equity market structure based on Shapley value

  • NI Xuanming1, QIU Yuning1, ZHAO Huimin2, SUN Huixia3
Author information +
History +

Abstract

At present, market participants in the private equity market are gradually differentiated, and the market structure has changed accordingly. From the perspective of cooperative game, this paper abstracts the private equity market as an alliance composed of fund managers and investors, and establishes a model to explore the impact of market structure on income distribution and human capital incentive based on Shapley value. We find that there are differences in the relative scarcity of human capital and monetary capital. Monetary capital occupies a dominant position in income distribution, while improving professional ability is the key to expand fund managers' income. The increase of monetary capital concentration can stimulate human capital investment, and the human capital incentive brought by monetary capital shows a marginal decreasing trend. The current work suggests that government should encourage and promote the synergy between market participants, which will create a win-win situation. Government-sponsored venture capital should focus on small and medium-sized private equity funds, so as to stimulate human capital incentive, to optimize the market structure and enhance the vitality of market participants.

Key words

private equity / market structure / Shapley value / income distribution / cooperative game

Cite this article

Download Citations
NI Xuanming , QIU Yuning , ZHAO Huimin , SUN Huixia. Private equity market structure based on Shapley value. Systems Engineering - Theory & Practice, 2022, 42(4): 923-936 https://doi.org/10.12011/SETP2021-2390

References

[1] Metrick A, Yasuda A. The economics of private equity funds[J]. Review of Financial Studies, 2010, 23(6): 2303-2341.
[2] 武晨, 倪宣明, 孙晓霞, 等. 代理人跨期消费决策下的有限合伙制序贯博弈均衡分析[J]. 应用数学学报, 2021, 44(4): 459-474.Wu C, Ni X M, Sun X X, et al. Sequential game equilibrium analysis of limited partnership based on optimal intertemporal consumption decision[J]. Acta Mathematicae Applicatae Sinica, 2021, 44(4): 459-474.
[3] 倪宣明, 沈佳瑜, 赵慧敏, 等. 基于讨价还价的私募基金机制比较研究[J]. 中国管理科学, 2022, 30(2): 69-79.Ni X M, Shen J Y, Zhao H M, et al. A comparison of mechanisms in private equity funds based on the bargaining model[J]. Chinese Journal of Management Science, 2022, 30(2): 69-79.
[4] 倪宣明, 张俊超, 赵慧敏, 等. 二次效用函数下的私募股权投资基金契约设计研究[J]. 系统工程理论与实践, 2020, 40(9): 2314-2326.Ni X M, Zhang J C, Zhao H M, et al. Contract design of private equity fund with a quadratic utility function[J]. Systems Engineering—Theory & Practice, 2020, 40(9): 2314-2326.
[5] Huther N, Robinson D T, Sievers S, et al. Paying for performance in private equity: Evidence from venture capital partnerships[J]. Management Science, 2020, 66(4): 1756-1782.
[6] Braun R, Jenkinson T, Schemmerl C. Adverse selection and the performance of private equity co-investments[J]. Journal of Financial Economics, 2020, 136(1): 44-62.
[7] 丁川, 陈璐. 考虑风险企业家有公平偏好的风险投资激励机制——基于显性努力和隐性努力的视角[J]. 管理科学学报, 2016, 19(4): 104-117.Ding C, Chen L. Incentive mechanism for venture investment when venture entrepreneurs have fairness preferences—From explicit efforts and implicit efforts perspectives[J]. Journal of Management Sciences in China, 2016, 19(4): 104-117.
[8] 倪宣明, 沈佳瑜, 张俊超, 等. 有限合伙制私募股权投资基金中的随机性契约研究[J]. 系统工程理论与实践, 2020, 40(12): 3124-3136.Ni X M, Shen J Y, Zhang J C, et al. Randomized contracts in limited partnership private equity fund[J]. Systems Engineering—Theory & Practice, 2020, 40(12): 3124-3136.
[9] 倪宣明, 武晨, 赵慧敏. 多期有限合伙制与公司制的道德风险和机制选择[J]. 应用数学学报, 2018, 41(1): 83-97.Ni X M, Wu C, Zhao H M. Repeated moral hazard and mechanism selection between limited partnership and corporate system[J]. Acta Mathematicae Applicatae Sinica, 2018, 41(1): 83-97.
[10] Braun R, Jenkinson T, Stoff I. How persistent is private equity performance? Evidence from deal-level data[J]. Journal of Financial Economics, 2017, 123(2): 273-291.
[11] Brown G, Harris R, Hu W, et al. Can investors time their exposure to private equity[J]. Journal of Financial Economics, 2021, 139(2): 561-577.
[12] Sohl J. The private equity market in the USA: Lessons from volatility[J]. Venture Capital, 2003, 5(1): 29-46.
[13] Ivashina V, Lerner J. Pay now or pay later? The economics within the private equity partnership[J]. Journal of Financial Economics, 2019, 131(1): 61-87.
[14] Lerner J, Mao J, Schoar A, et al. Investing outside the box: Evidence from alternative vehicles in private equity[J]. Journal of Financial Economics, 2022, 143(1): 359-380.
[15] Clayton W W. The private equity negotiation myth[J]. Yale Journal on Regulation, 2020, 37(1): 67-115.
[16] Da Rin M, Phalippou L. The importance of size in private equity: Evidence from a survey of limited partners[J]. Journal of Financial Intermediation, 2017, 31: 64-76.
[17] Sensoy B A, Wang Y, Weisbach M S. Limited partner performance and the maturing of the private equity industry[J]. Journal of Financial Economics, 2014, 112(3): 320-343.
[18] Fang H, John R N, Song Z, et al. Private equity performance and capital flows: Evidence from China[J]. Emerging Markets Review, 2018, 37: 223-244.
[19] Humphery-Jenner M. Private equity fund size, investment size, and value creation[J]. Review of Finance, 2012, 16(3): 799-835.
[20] Milosevic M. Skills or networks? Success and fundraising determinants in a low performing venture capital market[J]. Research Policy, 2018, 47(1): 49-60.
[21] 张学勇, 张琳. 风险投资家职业背景与投资业绩[J]. 管理科学学报, 2019, 22(12): 84-104.Zhang X Y, Zhang L. Venture capitalist's prior work experience and investment performance[J]. Journal of Management Sciences in China, 2019, 22(12): 84-104.
[22] Fenn G W, Liang N, Prowse S. The private equity market: An overveiw[J]. Financial Markets, Institutions and Instruments, 1997, 6(4): 1-106.
[23] Cavagnaro D R, Sensoy B A, Wang Y, et al. Measuring institutional investors' skill at making private equity investments[J]. Journal of Finance, 2019, 74(6): 3089-3134.
[24] Barber B M, Yasuda A. Interim fund performance and fundraising in private equity[J]. Journal of Financial Economics, 2017, 124(1): 172-194.
[25] Von Neumann J, Morgenstern O. Theory of games and economic behavior[M]. 2nd ed. Princeton: Princeton University Press, 1947.
[26] Shapley L S. A value for n-Person games[M]// Contributions to the Theory of Games (AM-28): Volume II. Princeton: Princeton University Press, 2016: 307-318.
[27] Faigle U, Kern W. The Shapley value for cooperative games under precedence constraints[J]. International Journal of Game Theory, 1992, 21(3): 249-266.
[28] Gul F. Bargaining foundations of Shapley value[J]. Econometrica, 1989, 57(1): 81-95.
[29] 饶卫振, 朱庆华, 金淳, 等. 协作车辆路径成本分摊问题的B-T Shapley方法[J]. 管理科学学报, 2019, 22(1): 107-126.Rao W Z, Zhu Q H, Jin C, et al. A Binary Tree Shapely method for cost sharing of the collaborative vehicle routing problem[J]. Journal of Management Sciences in China, 2019, 22(1): 107-126.
[30] 张瑜, 菅利荣, 刘思峰, 等. 基于优化 Shapley 值的产学研网络型合作利益协调机制研究——以产业技术创新战略联盟为例[J]. 中国管理科学, 2016, 24(9): 36-44.Zhang Y, Jian L R, Liu S F, et al. Interests coordination mechanism of university-industry network cooperation based on optimized Shapley value—A case study in industrial technology innovation strategy alliance[J]. Chinese Journal of Management Science, 2016, 24(9): 36-44.
[31] Hart O, Moore J. Property rights and the nature of the firm[J]. Journal of Political Economy, 1990, 98(6): 1119-1158.

Funding

National Natural Science Foundation of China (71991474)
PDF(887 KB)

766

Accesses

0

Citation

Detail

Sections
Recommended

/