Research On Financial Innovation Of SME

This paper focuses on the capital structure and financial method of small and medium-sized enterprise (SME). The paper researches the choice of SMEs' capital structure under information asymmetric, discusses the character of financial innovation, which meet the demand of SME.In the light of Xiao Kai Yang' s Neoclassical Economics and Inframarginal Theory, the paper indicated that the significance of SME and fundamental reason of financing issues of SME, also explained the reason of emerging financial innovation.This paper analyses investigate data then indicates the dualistic character of Chinese SMEs 'financing. The state-owner SME has high debt ratio, on the other side, the private SME is very difficult to apply loan because of policy discrimination.This paper discusses the capital structure of SME under information asymmetric. The key to SME is how to maximize the market value under bound condition. The paper argues the SME can only choice sub-optimal capital structure under information asymmetric after researching the choice of financing method and maturity, and also argues the debit financing is better than other financing method. On this precondition, the paper indicates that introducing financial innovation is Pareto improvement and the financial innovation is the evolution of division of labour. The two- stage model verifies the conditional financing is suitable to SME. The debt and stock of corporation can be viewed as options, this theory is fundamental to pricing financial innovation.The financial gap of SME is caused by knowledge gap that SME understand less financial method than large firm. This paper researches on kinds of financial innovation in order to reduce information asymmetric.The account receivable and stock are current assets. The current assets represent the expect cashflow. So the account receivable and stock can be set as collateral. The collateral model verifies the different lender can be separate by security. So he trading off between "golden rule " and separate signal could be solved by security.The financing issues faced by SME are very difficult to apply plain vanilla loan. The compromise is to share the future revenue with outside investor. So the best financial method is minimizing the exogenous transaction cost that prevents the adverse selection. The paper find out that commodity-financing and debtor-in-possession financing are risk-sharing innovation. The model discussed whether the separate signal is exist when the observable variable indicates the debtor's revenue like the principle or interest and debtor's revenue are closely associated with the open market price of assets.Asset-backed securitization (ABS) is the newest financial innovation. The process of ABS is a longer trade of roundaboutness, depending on highest efficiency of financial deeping and division of labour. The paper indicated that the account receivable securitization, SMEs' loan securitizationand and bad debt securitization are acceptable innovation in SMEs' financing. In China the trust maybe is a main structure in ABS because many element as SPV, true sale cannot be operated.It is very important to pricing the financial tool correctly, but many financial areAbstractinvolved several assets. The option implicit in financial tool is multi-option. It's difficult to solve the partial differential equation, which is concerned with the above option. On given condition, considering the constant interest rate, using Non-arbitrage principle and structure technology, substitutes above options into exotic option that is composed of down-and-out options, exchange options and vanilla options. A general solution of discussed pricing model can be derived.This paper empirical tests the elements that affect the capital structure of SME through the sample of Hunan province. The empirical results show the evidence that support constrained pecking order financing in SMEs' financing. The evidence also shows SME execute the "golden rule" of financial management. We find no evidence that the number of employ...