| Micro and small enterprises(MSEs)are the most active economic cells in the market economy,playing an essential role in supporting economic growth,absorbing employment and fostering innovation.However,due to their own characteristics as well as supply-side environment,the financing difficulty issue has been a major constraint to the survival and development of MSEs in China.Due to the inherent information asymmetry,insufficient collaterals and low funding needs,banks usually adopt the credit rationing policy of being cautious and reluctant to lend or even not to lend to MSEs.Previous studies primarily focus on exploring the MSEs’ financing difficulty question in the perspective of financial institutions,and proposed that to vigorously develop small and medium-sized financial institutions,and to improve the market competition of banking industry is the fundamental way to solve the financing problem of MSEs in China.With the deepening of the China’s financial industry reform,regional small and medium-sized financial institutions generate and grow.Meanwhile,relevant government sectors have introduced a series of policy initiatives on encouraging and guiding the financial institutions to increase credit support for MSEs.However,in the context of the excessive reliance on collaterals or guarantees of China’s financial institutions,the improvement on the supply-side environment still plays a limited role in alleviating the financing difficulty of MSEs.The issue of difficulty in getting loans for MSEs is the result of both being credit rationing from the supply-side and self-rationing from the demand-side.The classical credit rationing theory emphasizes on the supply-side,while ignores the possible influential factors of the demand-side,such as the existence of self-rationing MSEs or so called “Discouraged Borrowers.” Specifically,faced with application costs and imperfect screening of applicants by banks,potential borrowers who have credit demand may not apply for a bank loan(i.e.,self-rationing).The characteristics of MSEs’ owners themselves(for example,the psychic costs,the cognitive biases,or the behavioral biases,caused by the fear of loan application rejection or lack of understanding of loan policies and procedures,etc.)may lead MSEs with funds demand to give up applying for loans from banks.Extant studies using the household survey data have shown that lack of financial literacy is an important reason for limited participation in formal financial markets:the same logic also applies to MSEs.However,due to the scarcity of MSEs data,whether or not the financial literacy of business owners affects the accessibility to formal credit for MSEs remains an open question.This thesis will provide direct evidence.The timely acquisition of financial resources is of crucial importance to the smooth operation,survival and development of MSEs.In the circumstance of banks’ credit grudging,turning to alternative possible financing channels seems to be an inevitable choice for MSEs to fill the “funding gap.” The literature on financial bootstrapping suggests that small business owners respond creatively to their financing needs by using any financing source acquirable when confronted with restricted access to traditional capital;this thesis focuses on one of the most common forms of bootstrap finance methods that has been overlooked in the mainstream literature: small business owners use personal credit cards to finance their business operations.Compared to bank loans,credit cards mainly have two outstanding advantages.First of all,the characteristics of credit card debt fit well with the characteristics of credit demand of MSEs.In terms of MSEs’ demand for credit,most MSEs do not have growth or expansionary capital needs,and their credit demand is mainly manifested as the shortage of working capital for daily operation characterized as “short term,small loans,low frequency and high timeliness.” The “small revolving amount” characteristic of credit cards is a good match for the characteristic of MSEs’ credit demand known as “short term,small loans,low frequency and high timeliness.” Second,the threshold for access to the credit card market is low without any guarantee or collateral requirements,yet the use of credit card is quite flexible.The approval of bank loans has to go through a complicated process,which often takes weeks or even months,and the pledge guarantee is still the mainstream model of small and micro financial services for banks.Compared with the strict approval and slow lending of bank loans,credit card has the advantages of low application threshold,fast approval and high convenience to borrow and repay.This thesis will focus on the phenomenon that micro and small business owners in China respond to liquidity constraints with the help of personal credit cards.Small businesses frequently face the situation that several 10,000 yuan in cash is needed for turnover.Compared with the lag of bank loans,the characteristics of "pay-as-you-go" make credit card debt a good financial instrument for MSEs to deal with contingent liquidity risk.Therefore,another research focus of this thesis is to examine whether and how credit card use affects the survival and entry of MSEs in China.In view of the above discussions of both theoretical and realistic background,firstly,this thesis systematically analyzes the current situation of loan demand and credit constraint of MSEs,and studies the problem of loan difficulty of MSEs in China from the perspective of financial literacy of business owners.Secondly,this thesis examines how micro and small business owners respond to credit constraints with the help of personal credit cards.Finally,this thesis further studies the effect of credit card use on the survival and entry of MSEs based on the finance-firm dynamic nexus.This thesis consists of seven chapters,and the specific content of each chapter and major conclusions are organized as follows:Chapter 1: Introduction.This chapter brings forward the background and research questions of this thesis,then,introduces research framework as well as research design,and finally we point out the contribution and shortage of this thesis.Chapter 2: Overview of MSEs and analysis of financing channels.In this chapter,first,we review the related literature on the definitions of relevant concepts,the importance and the description of typical MSEs group;then,we summarize the studies on MSEs’ financing channels.Chapter 3: Theoretical basis and literature review.In this chapter,firstly,we review the relevant theories on small business finance including credit rationing theory and “discouraged borrowers” theory,the pecking order theory as well as the financial growth cycle theory;secondly,we systematically summarize the empirical evidence on the credit availability for MSEs from the perspectives of the financial institutions(supply-side),the businesses(demand-side)and the business owners(demand-side);thirdly,we move to the studies on financial bootstrapping strategy of MSEs and emphasize on the research status of credit constraints and credit card financing;after that,we review and discuss the research on the relationship among finance,firm dynamics and economic growth;lastly,we summarize and comment on the extant studies so as to highlight the research value of this thesis.Chapter 4: Research on the influencing factors of bank credit availability of MSEs-from the perspective of financial literacy.Using the data of the 2015 China Household Finance Survey(CHFS 2015)and China Micro and Small Enterprise Survey(CMES 2015),this chapter first investigates the impact of financial literacy on MSEs’ accessibility to bank loans in China,considering the current situation of loan demand and credit constraint and differentiating two types of MSEs(formal MSEs and informal MSEs);and then,considering the hukou-based discrimination and that local financial markets also play a role in MSEs’ capital acquisition,this chapter further examines whether the hukou type of business owners and the local regional financial development affect the positive effect of business owners’ financial literacy on the availability of bank credit.Our estimation results show that: first,financial literacy of owners positively influences informal MSEs’ availability to formal credit,while such an effect vanished when formal MSEs are examined;second,the hukou type of business owners and the level of local financial development do impact the positive relationship between financial literacy and informal MSEs’ availability to formal credit.Specifically,the positive relationship only exists among informal MSEs whose owners have rural hukou and it is more pronounced in areas when local financial development is lower.The chapter further concludes that when business owners are more financially literate,informal MSEs are more likely to have bank credit needs,and more likely to submit loan applications to banks,as well as more likely to have their loan applications approved.Chapter 5: Research on the relationship between credit constraint and credit card use.This chapter still uses the data of the 2015 CHFS and 2015 CMES to investigate the impact of credit constraint on MSEs’ owners’ propensity to resort to their personal credit cards for financing.Our estimation results show that: first,households/owners are more likely to use credit cards for business purposes when their informal/ formal MSEs are credit constrained.The credit card use density in the community,hukou type,and financial literacy of business owners as wll as firm age do impact the positive relationship between credit constraint and credit card use.Specifically,this positive relationship is more pronounced when credit card density is higher in the community,when the owner holds urban hukou,when the owner is more financially literate,and when the business is more aged.Since the access to formal finance is not randomly assigned,we do need to address the selection bias.Following the literature on Heckman Selection Model,we rerun the major regressions with controlling for the selection bias by using collateral requirement as the exclusion condition and obtain consistent results.Chapter 6: Research on the relationship between credit card use and the survival or entry of MSEs.Using the data of the 2013 China Household Finance Survey(CHFS 2013)and the 2015 China Household Finance Survey(CHFS 2015),this chapter investigates the impact of credit card access on the probability of MSEs’ survival or entry.Our estimation results show that: first,credit card access enhances informal MSEs’ subsequent survival rates;second,credit card access significantly promotes the entry of formal MSEs,but it has no effect on the entry of informal MSEs,which is consistent with the literature on endogenous choice of enterprise organizational forms,that is,organizational forms when MSEs are set up indicate distinct capital needs and MSEs with higher degree of organization tend to have higher capital needs.Endogeneity caused by omitted unobservable factors may lead to biased estimations,such as the unobservable management ability of business owners may simultaneously affect the credit card use and MSEs’ ability to survive or choice of entrepreneurship.In this chapter,we select the bank credit cards promotion as the instrumental variable of credit card use,and our IV estimation results confirm that the positive relationship is causal.Chapter 7: Conclusions and further work.This chapter summarizes the main findings of the thesis.Possible policy implications and extensions of the work are also discussed.The main contributions of this thesis include three aspects.First of all,the innovations of research questions are as follows.(1)Different from previous studies,thanks to the detailed variables,this thesis examined the availability of bank loans for MSEs by making full use of detailed information during loan application process,other than simply defined the availability of bank loans of MSEs according to whether they have bank loans at present or not.(2)This thesis demonstrated the positive effect of MSEs owners’ financial literacy in improving the availability of bank credit for the first time,which is a new complement to the literature on influencing factors of formal credit availability for MSEs.(3)This thesis documented the importance of credit cards in financing MSEs,which complements the studies on small business bootstrap finance strategy.(4)This thesis documented the positive impact of credit card access on the subsequent survival and entry of MSEs,which provides micro evidence for the debate between finance-economic growth nexus.Second,there are also some innovative points in the data source.A large number of research have been accumulated about the financing issue of MSEs,but due to the poor availability of MSEs data,few systematic studies refined middle and small-sized enterprises to small or micro enterprises.In addition,most of the previous studies are based on the survey data of a specific region,which is weak in reliability and representativeness.Some studies use the data based on the three new board listed small and medium-sized enterprises(SMEs),but they are still not representative.The data used in this thesis is CHFS and CMES,conducted by Southwestern University of Finance and Economics,which are especially of good representation and high quality.These two datasets have specific advantages respectively,of which the former is household survey data which covers detailed information on individual level,household level and business level,but does not collect the information of formal businesses;the latter is MSEs survey data,of which the surveyed entities are firms including sole proprietorship,partnership,and corporation,in addition to the characteristic information of the most important owner of the MSEs,the information collected also covers business operation,investment,financing,innovation and recruitment.These two datasets complement each other,which provide a good foundation for this thesis.Finally,the estimation methods also have a little contribution.We select econometric estimation methods based on the reduced economic model to test our hypotheses,such as OLS,probit,Tobit and other common estimation models.According to the endogeneity of the research questions,we select respective estimation methods,such as IV estimation,Heckman Selection Model,or Propensity Score Matching.We also use the stepwise regression method,try alternative measures of the key variables,and subsample regressions to conduct heterogeneity tests,robust checks or channel analysis.The only possible innovation in the estimation method in this thesis is the nice try that using the information in the community to construct proxy variables for the local credit card usage density and regional formal financial development. |
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