Research On SME Capital Structure Based On Behavioral Corporate Finance

Throughout the history of the development of SMEs, especially since the reform and opening-up, small and medium enterprises as the most active forces in market economy play a pivotal role in solving the employment, improving people's livelihood, creating technology and so on. Compared to its contribution, small and medium enterprises face many difficulties in the growth process, which of the most critical they facing are serious financial difficulties.In the existing literatures about financing of SEMs, information asymmetry is recognized as the main reason that causes financing constraints for SMEs. How to ease the situation of asymmetric information between financial institutions and SMEs and reduce the adverse selections that the financial institutions make in the credit activities in the case that SEMs lack of information disclosure system and its platform is backward and it is in low willingness to disclose information. This issue has been more concerned by scholars and industry experts. At present, the fields on the analysis and recommendations in our country focus on three aspects: First, system construction, namely the establishment and improvement of information disclosure system for SMEs, strengthening the information disclosure regulation for SMEs; Second, system construction, namely sounding and improving the social credit system in China; Third, product construction, namely improving the technology financial institutions'loans and supporting a more diversified financial products. The above researches were mainly considered from the government and banks. They made recommendations to improve the problem of asymmetric information, but they ignored how to explore information further from the major financing body itself - small and medium enterprises and neglected to seek ways to solve the financing problem from the SMEs themselves.For the above problems existing in current situation, this paper attempts to introduce some researches on behavioral corporate finance theory to the research on the financing structure of SMEs in China. This paper takes SMEs themselves as a starting point and does deeper study on the process of SMEs financing decision, explores the effort that irrational factors such as the psychological characteristics and behavioral characteristics of managers causing to the existing financing structure of SMEs, identifies the risk preferences of SMEs'managers'financing in order to help financial institutions understand the psychology and behavior of SMEs'managers'financing decision and alleviate the information asymmetry between banks and SMEs. The main work and conclusions in the paper are as follows:First, By analysis of statistical data, the paper first summaries SMEs'financing situation. And on the basis of financing methods analysis from cost point, the paper concludes capital structure characteristics of SMEs including:Internal financing is the the key source of SMEs'capital formation, but the number of internal financing is not adequate ;In China, SMEs'financing is more dependent on bank financing of the indirect financing, and the proportion of direct financing is lower;At present, medium enterprises'financing problem has gotten some improvement, but almost 99% of small businesses still have obvious credit financing constraints ; Non-formal financing channels are important sources of funds for SMEs, but their support is unstable;Capital structure of SMEs in different types or stages of development are always different.Second, this paper identifies the factors that affecting the decision of SMEs'financing structure from the perspective of behavioral corporate finance. Based on the review and analysis of related theory, this paper identifies and captures a lot of managers'irrational factors that affect SMEs'financing structure from the perspective of behavioral corporate finance. These factors include the level of managers'confidence, optimism, risk preference, time preference, desire of control and business objectives. On the view of the demographic characteristics of managers to the psychological characteristics'important influence, this paper will take the managers'demographic characteristics into the scope of the study factors, such as age, education, height and origin. On this basis, this paper builds a multi-factor structure model for Chinese SMEs'financing structure in the perspective of behavioral corporate finance.Third, this paper validates related hypotheses of the multi-factor structure model for Chinese SMEs'financing structure in the perspective of behavioral corporate finance. This empirical study carried out in two stages in combination with the background of Chinese SMEs'financing. The first stage is the pre-survey during 67 SMEs in Jinan and the validation of questionnaires'reliability and validity by analysis of data. After this, this paper defines a final formal survey by deleting and adjusting some related items. The second stage is the formal investigation. This paper takes five cities of Shandong Province as the objects of survey and collects 268 valid questionnaires. Based on the analysis of the questionnaire, this paper analyze the internal and external model of the structural equation model and summarizes the results of hypothesis testing.Fourth, this paper put forward the suggestions on SMEs'financing. Based on the investigation and empirical study of the multi-factor structure model for Chinese SMEs'financing structure in the perspective of behavioral corporate finance, this paper takes literature review and theoretical analysis as the method to make suggestions from the banks, SMEs'managers themselves and government perspectives. This paper argues that it will be a quite difficult, longer and broader project to solve the problem of SMEs'financing effectively given the situation of China's current legal environment, economic status of the environment and human environment. Both banks, small and medium enterprises, or government agencies should make more efforts and changes.Overall, this paper uses questionnaires, face to face interviews and other forms. It adopts a method of normative analysis linked with empirical analysis and a method of qualitative research linked with quantitative research. This paper takes many SMEs in China as the objects to explore the relationship between managers'irrational characteristics and corporate financing. The following are the main innovations of this paper.First, the paper is more novel in the topic. Behavioral corporate finance has been concerned by domestic scholars in recent ten years. But the research on the behaviors of managers in the capital market is still in a starting stage. And the existing domestic literatures are all investigated around the irrational characteristics of managers. Based on the lack of domestic research on SMEs'financing structure from the perspective of behavioral corporate finance, the topic of this paper is novel in some extent.Second, using psychology and other related theory, this paper builds a multi-factor structure model for Chinese SMEs'capital structure in the perspective of behavioral corporate finance. The model covers comprehensively several irrational factors, such as confidence level, optimism level, risk preference and time preference, and demographics as age, and scale of SMEs. The above factors exceed the limits of influencing factors of SMEs'capital structure, enriching and expanding the related domestic study.Third, the existing domestic related researches build the irrational model of managers based on behavioral and psychologic hypothesis and argue in the theory. But they didn't provide empirical support on the financing structure of SMEs. This paper mainly analyses the relationship between the irrational factors of SMEs'managers and the financing structure from the perspective of behavioral corporate finance and verifies with empirical research, which makes up and perfect the domestic system of behavior corporate finance theory.