Study On The Corporate Governance In Small And Medium-sized Enterprises Of China

Since the reform and opening up, small and medium-sized enterprises (SMEs) have incontestably been playing an important role in supporting the sustainable economic growth of China. However, the lack of outside financing makes the pace of the SMEs being heavily bottlenecked now due to governance problems in the SMEs. The study on the corporate governance in the SMEs, therefore, is significantly involved with the sustainable growth of the SMEs and even the country's economy in addition to the academic research of corporate governance. Based on Stakeholder Theory, the paper deals with the governance problems in the SMEs under a general theoretical framework of corporate governance. Due to the unique capital structure of the SMEs, we argue that the second agency problem is the main one in the corporate governance of the SMEs through analyzing the effectiveness of the available internal and external governance mechanisms. In use of the analytical modeling for the second agency problem, we conclude that the available product market mechanism is effective, but the effectiveness is limited; the capital market mechanism can provide adequate effectiveness, if being taken into consideration. We analyze the impact of the capital market mechanism as a whole on the improvement of the corporate governance in the SMEs by using Financing Agency Theory: the corporate governance of the listed companies on the second board market can be influenced directly by the second board; the corporate governance of others in the SMEs also can be improved indirectly due to the interaction between the internal and the external control systems. Compared with the general theoretical framework of corporate governance, a dynamic theoretical framework of corporate governance is provided in the paper.