The Empirical Study On Growth And External Financing Of Small And Medium-sized Companies

Over the years, the relationship of external financing structure and the company’sgrowth has been the focus of scholars in China and abroad. External financingstructure is an important aspect of corporate governance structure; it coordinates theinterests and behavior between shareholders and managers, shareholders and creditorsthrough functions of equity and debt. Relationship between external financing andgrowth of the listed companies now has been a research focus, so far there is nounified conclusion among scholars.This paper analyzes the impact of external financing on SMEs growth based onthe MM theory, agency cost theory, pecking order theory, Draw on existing research athome and abroad，this study selects three indicators to measure SMEs growth whichhave been used by most scholars：Return on equity, net profit growth rate and revenuegrowth rate. This paper is to analyze the influences on growth imposed by fixed assets,long-term band credit financing, short-term band credit financing, equity financingthrough the linear model. Mainly, this study selects the Small and Medium-sizedListed Companies ’ financial data as samples, screens in line with the latest Criteriafor the classification of SMEs. After calculating the data of small and medium listedcompanies, it establishes a multiple regression model, proposed assumptions of therelationship between external financing and growth and then makes the empirical test,conduct a detailed empirical results analysis and interpretation in accordance withcharacteristics of small and medium-sized listed companies and the status quo inChina’s capital market.The study finds that accumulation of fixed assets has significantly negative effecton growth in the same period, but the effect becomes positive during the next period.Long-term bank credit financing rate and growth of SMEs has a curve relationship.Growth of SMEs and equity financing have a significantly negative correlation, andinternal financing is a significantly positive correlation. Agency cost theory and thepecking order theory has been empirical supported. And it points out the unreasonable fact in the structure of external financing for SMEs. The empirical results reflectChina’s capital market is underdeveloped, poor access to debt financing; equityfinancing preference is too strong. Finally, from the enterprises themselves, this paperput forward several policy recommendations among the four aspects: financingenvironment, financial institutions and Small and Medium-sized Listed Companiesplatform.