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A Research On The SMEs Development And Financial Support

Posted on:2005-08-04Degree:DoctorType:Dissertation
Country:ChinaCandidate:W LiFull Text:PDF
GTID:1116360152968444Subject:Western economics
Abstract/Summary:PDF Full Text Request
From 1990s, the SMEs have become the most important engine for the economicmarketlization and economic growth. Especially in the field of economic growth,employments expand technology innovation and social wealthy creation. Today, more andmore people pay their much attention to the SMEs development and its financial support. Now, it is difficult for SMEs to develop smoothly because of the "bottleneck"ofcapital. This means that current financial system cannot meet the SMEs finance demand,such as its multifarious financial characteristic. For example, "lower capital scale", "highercapital demands frequency"and "urgent timetable for capital demands". There are many kinds of SMEs in China mainland and in different district theydeveloped differently. It is difficult for us to solve the "Financing problem"if we onlydependent on one or two methods. On the contrary, we should combine the developedeconomics and enterprise capital structure theory together; learn advanced managementexperience from abroad. In the mean time, we also should use quantitative analysis. Onlyfor this, can we find a sufficient way to support SMEs effectively. That is also why theauthor of this article attempts to probe into this problem in the hope of making abreakthrough in the solution of their finance dilemma. The SMEs life cycle indicates that with the change of its external factors, the SMEscapital needs also varied. So the key factor we analyze is the SMEs financial cycle. In thisway we can find and meet enterprises different demand in different life cycle stages. The SMEs "bottleneck"reflects the restraints of the financing costs, the capitalavailability, the capital amount and capital supply in time and capital contract condition. Inorder to cut down the capital gain costs and to promote the investment revenue, we shoulduse different financial tools in accord with different stages in the SMEs life cycle. Themethods we analyzed that followed: (1) Set-up. In this stage, the capitals gain mainlyfrom private capital market and business angel. A lot of SMEs prefer this style to getfinancing because this method meets their capital need in time (such as floating capitalsupplied)even though capital cost is much higher than any other ways. (2)From Set-upstage to Survival and Developing stage. The major financing tool for SMEs is venture IIIcapital investment. In terms of venture capital, the high risk of investment makes it requirehigher investment revenue in a short time. This means, to most SMEs, their capital will berejected. On the contrary, small and medium-commercial banks or small andmedium-financial organization have a lot of advantages when they are dealing with SMEs,such as capital scale advantage, information advantage and supervision advantage etc. Forthis reason, we must develop commercial banks and small and medium-financialorganization to meet SMEs needs. (3)From SMEs life cycle, we know that the advancedfinancing system is to get the capital support from normal capital market directly. Itincludes equity financing and debt financing. But to our normal capital market at present,many strict roles such as higher scale and higher investment revenue had made it difficultfor SMEs to enter the capital market because of theirs small capital scale and lower capitalrevenue rate. "Finance Gap"is the product of market failure. It brings the net loss of social welfare.In order to avoid the market failure, the government should offer some "Public products"toavert the converse choice and moral hazard which originated from information asymmetryso that the financial institution can decrease the loan risk. For example, the industrypolicies regulation, finance and revenue support, laws regulation, guarantee systemestablishment and social service system supply. The most important thing we must do nowis to create a multi-financing system to support SMEs, such as develop private mark...
Keywords/Search Tags:Small and medium-sized enterprises (SMEs), Financial Support, Life cycle, Financial cycle
PDF Full Text Request
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