A Research On The Irrational Financial Behavior Of Small Enterprises

The small enterprises are playing a very important role of our national economic development and social stability. The financial behavior of small enterprises are as follows, financing behavior, investment behavior, operating capacity, solvency, capacity development, which makes up their Survival and development. There are more and more irrational investment behavior and irrational financing behavior among the small enterprises to be solved. Study abroad for irrational financial behavior has gradually matured, but our research for irrational financial behavior are on the initial stage. So far most of the research for the irrational financial behavior are in view of the perspective of investors and managers. Most of the listed enterprises had been researched. But research for small and medium sized enterprises are very few studied, especially for small enterprises.But small and medium sized enterprises in China is an important part of the national economy, to solve these problems for small enterprises create an enormous contribution t to their survival and development.Firstly, according to the characteristics of small firms, I analyze the irrational financial behavior from the perspective of managers in this article. Then, I point out the irrational financial behavior of small enterprises in their investment and financing process. Insufficient investment and over-investment are two typical irrational behavior of the small enterprises There are two irrational behavior in the small enterprises, the financing preference and over-financing. Then, combined with an analysis of behavioral finance, I analyize the reason of the irrational investment and irrational financing in small enterprises, the spect of the first analysis is based on overconfidence, the second point of view is based on herd mentality. Using Cognitive Biases to explain the irrational judgement among the Incremental cash flow, external competitive factors, sunk costs and so on. Finally, recommendations are proposed according the analysis of the various irrational behavior.