Mode Selection, Financing Of Small And Medium-sized Banks To Smes

It is crucial to provide financial service for medial-and-small enterprises and how to clarify it's market orient for incumbent medial-and-small financial agencies, from which both can benefit.This paper suggest that relationship financing will be realistic choice of medial-and-small enterprises and medial-and-small financial agencies by analysis based on banking-enterprise finance model, this paper organized as follow. In the first sector, I develop a theoretic framework in which based on literature overview and review; In the second sector, internal relationship between medial-and-small enterprises and medial-and-small financial agencies will be analyzed ,and I propose that financing dilemma faced by medial-and-small enterprises restrain the further development of it's own and resulting negative macro-effect on society, while medial-and-small enterprises structure fundamental factor of modem market economy. My focus is on why both big banks and medial-and-small banks credit discriminatively against medial-and-small enterprises; we provide theory and evidence about matching between medial-and-small banking and medial-and-small enterprises, in which sector advantage and disadvantage derived from medial-and-small enterprises financing exerted by big banks or medial-and-small banks will be compared. Then, in the third sector, I argue efficiency of arm length financing and relationship financing systems respectively. There are all efficiency gain from two financing systems under specific circumstance. To China's medial-and-small banks and medial-and-small enterprises, however, relationship financing system is more efficient. In the fourth, I conclude that relationship financing will be practical choice and main bank system optimal institution arrangement for China's medial-and-small banks and medial-and-small enterprises allowing for it's attribute that handle informational asymmetry between medial-and-small banks and medial-and-small enterprises desirably and resulting stable financial supports and universal financial services for medial-and-small enterprises. Finally, amounts of advices will be proposed.