Analysis of “the First Case of Valuation Adjustment Mechanism” under Newsvendor Model

Abstract

Abstract:

In the trial of the first case of Valuation Adjustment Mechanism (VAM)-Haifu investment case in China, the valuation ad-justment mechanism entered into between the investor and financing company was ruled invalid on the ground that it is beyond the company's operating capacity, and will damage the interests of the company and its creditors. This paper refers to the mechanism designed in The First Case of VAM, and establishes a newsvendor model which contains a VAM between the private equity (PE) and the financing company. It studies the setting problem of the performance objective in a VAM under the supply chain perspective. And it discovers a "Cooperation Performance Interval" which benefits both the PE and the financing company and could promote bilateral cooperation. Meanwhile, the main factors affecting this interval is also analyzed. This paper provides a theoretical basis for scientific setting of the per-formance objective.

Key words: valuation adjustment mechanism, performance objective, cooperation performance interval, newsvendor model

Deng Jie, Yu Hui. Analysis of “the First Case of Valuation Adjustment Mechanism” under Newsvendor Model[J]. , 2018, 30(9): 23-37.

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