Corporate Finance Strategies For Small And Medium Sized Enterprises In Hongkong

Small and Medium Sized Enterprises (SME) play a significant role in the economies of Hongkong, SME also make a vital contribution to GDP and employment in Hongkong. However, SME in Hongkong generally have difficulties getting finance support due to their low capital investment and productivity as well as the existence of information asymmetry. The objectives of the research are to analyse the reasons of being difficulties for raising finance and investigate the feasible sources of finance for the major industries of SME. In addition to statistics, applying case study to ascertain any corporate finance strategies can help SME to get external finance.Business funds for SME mainly come from entrepreneurs' own money, trade credits and borrowings from financial institutions. Owing to inadequacy of entrepreneurs' personal funds, SME become highly relying on debt financing. SME have to aim at improvement of business performance in order to make ease for getting external funds. First of all, SME can make good use of strategic alliance with non-competitors enhance the competitiveness and earning power of the business. Secondly, increase of trading profits and changing dividend policy can lower the gearing so that the financial risk and default risk can be reduced. Thirdly, raising human capital by executing employee stock ownership plan. Lastly, building up companies' publicity to strengthen confidence of investors and lenders.