The Study Of Applicability Of Pecking Order Theory In The SME Financing In China

There is the large number of SMEs in China, SMEs in China become a pillar of strength for our economic construction. But by contrast, SMEs can not truly enter into China's capital market, Even if access to, and can not escape the role of the players. Therefore most SMEs rely on their own sources of financing for additional investments. Even if SMEs have the privilege into the capital markets business, it is difficult to complete financing through the bond market, which is inconsistent with the Pecking Order Theory that generally applicable to Western countries. All these show that China's capital market is not perfect and that SMEs finance difficultly.At present, China's economic development has experienced a rare window of time period. And how to change the path of economic growth and adjust industrial restructure is a common problem faced by the whole society. The aim is difficult to achieve if the market only depended the government and the central enterprises. If the government can mobilize the greatest enthusiasm for SMEs, gradually lead resources to new industries with SMEs'flexibility. This has advantages to both the country and the people. So the academic and practice should be in-depth discussion on the SME sector capital sources.This paper started with the development process of Pecking Order Theory, analyses the theory's generation and evolution. On the basis of this, through the preliminary observation of SME financing, may discover that the general characteristics of SME financing, including difficult financing, high financing costs and high finance risk; and at the different growth stage of SMEs choose different financing means. Besides, on the current situation of the SMEs in the statistical description can be seen that SMEs have the more preference on the their own sources. Even if the external financial measures, SMEs are also indirectly dependent on bank loans and other forms of financing; SMEs are often inaccessible to the direct financing channel because of many restrictions. And SMEs are hard to try for loans. To some extent, qualitative description proved the cause of the SMEs choosing financing channel. It is based on this analysis, combined with financial data related to small and medium enterprises, used measurement method, the paper reached conclusion of SME financing order that "endogenous financing, equity financing, bond financing", which is contrary to Pecking Order Theory. Finally, in view of this "homeomorphism", the paper discussed sources of financing for SMEs within the original purpose of the preferred and second best equity financing rather than debt financing factors, in order to expand financing channels for SMEs, analysis of market conditions to provide reference for reference.