Empirical Research On The SMEs Capital Structure And Operating Performance

As supporting strength for the socialist market economy of China, small andmedium-sized enterprises are playing an important role in promoting economicgrowth, technological innovation, expansion of product exportation, alleviatingemployment pressure and other aspects of China. Nevertheless, the weak overallstrength of small and medium-sized enterprises in China has made it impossible toresist risks appeared in the development and overcome the universal financialdifficulty in operation. Such situation, along with the depressed global economy, havecaused considerable attack on the production and operation of small andmedium-sized enterprises and prevented them from growing further. In May of2004,the State Council approved the establishment of a plate for small and medium-sizedenterprises in China, which has created condition for such enterprises to financethrough going public. However, the equity financing orientation of the small andmedium-sized enterprises resulted from a difficulty to attain debt finance, along withtheir irrational capital structure, have made it difficult to bring the effects of financinginto play in the small and medium-sized enterprises in China. Thus, negativeinfluence on the daily production and operation activities of the enterprises and evenseveral financial risks will be resulted in and the sustainable and healthy developmentof the enterprises will be hindered. Therefore, one current important task is tocontinuously optimize the capital structures of small and medium-sized enterprisesand constantly improve their economic benefits.This paper, upon a theoretical analysis on the capital structures and businessperformances of small and medium-sized enterprises in China, has built a regressionmodel on the capital structures and business performances of the enterprises. Afterthat,204listed enterprises that went public in the plate for small and medium-sizedenterprises were selected and an empirical regression analysis on their data in2011and2012was conducted. The analysis indicates that: most capital structures of small and medium-sized enterprises in China are consisting of equity capitals; theproportions of debt capitals are too low while the proportions of short-term debts ofdebt capitals are too high and the proportions of long-term debts are low; theprofitability of the enterprises declines significantly with the rising of the debt level;the regression result between long-term debts and business performances of theenterprises is not significant; the practices of concentrating equities in someshareholders and enhancing the balance among equities are good for improvingbusiness performance of the enterprises; enterprises of larger scales and betterprospects are stronger in making profits; the investment of research and developmentfunds have not increased the peculiarity of the enterprises for forming corecompetence or improving the business performance of the enterprises.Upon the empirical analysis, this paper has come up with countermeasures orsuggestions on improving financing methods and business performances of small andmedium-sized enterprises by combining with characteristics of small andmedium-sized enterprises in China, including: expand channels for debt financing andperfect the debt management mechanism; maintain a moderate degree of equityconcentration and enhance the balance among equities; enlarge enterprise scaleseffectively; vigorously improve the innovation ability; strengthen the construction of acredit system for small and medium-sized enterprises, and; improve financialmanagement levels of the enterprises.