  This paper proposes two kinds of time-inconsistent preferences (i.e. time
flow inconsistency and critical time point inconsistency) to further advance
the research on the exit decision of venture capital. Time-inconsistent
preference, different from time-consistent preference, assumes that decision
makers prefer recent returns rather than future returns. Based on venture
capitalists' understanding of future preferences, we consider four types of
venture capitalists, namely time-consistent venture capitalists, venture
capitalists who only realize critical time point inconsistency, naive venture
capitalists and sophisticated venture capitalists, of which the latter three
are time-inconsistent. All types of time-inconsistent venture capitalists are
aware of critical time point inconsistency. Naive venture capitalists
misunderstand time flow inconsistency while sophisticated ones understand it
correctly. We propose an optimal exit timing of venture capital model. Then we
derive and compare the above four types of venture capitalists' exit
thresholds. The main results are as follows: (1) all types of time-inconsistent
venture capitalists tend to exit earlier than time-consistent venture
capitalists. (2) The longer the expire date are, the more likely venture
capitalists are to delay the exit, but the delay degree decreases successively
(venture capitalists who only realize critical time point inconsistency > naive
venture capitalists > sophisticated venture capitalists).
