The Research On The Relationship Between Creditor Governance And Growth Of The Listed SMEs In China

As an important part of the corporate governance structure, creditor governance theory is the first to rise in the1980s, Based on the theory of capital structure and corporate governance theory, the foreign scholars have formed a relatively complete theory of governance and success practical experience. Under the action of the debt financing of "hard constraint", with the incentive and restraint mechanisms, creditor can form an effective oversight to the company’s managers; creditor governance with camera control mechanisms will achieve the transfer of control of the company under the role of the bankruptcy system, reducing the company’s agency costs under the separation of ownership and promoting the company managers to work hard, finally to promote the company’s growth. However, the creditor governance in China started late, with the rise in the late1990s, and because of our special institutional context and economic environment, the company is more interested in equity financing, the role of debt financing for corporate governance in our country is not get too much attention. But with the gradual saturation of equity financing, debt financing is bound to become the key to the development of the future of the company, so the research on creditor governance will be of great significance.How does the creditor governance form incentive and restraint mechanisms, and camera control mechanisms to the company’s manager, which features factors play the role of corporate governance and how about the performance in China then? This is the focus of this study.As an important part of our national economy, and with the further development of the capital market, SMEs has become the main force of China’s enterprises, on behalf of the economic vitality of our country. But it is undeniable that the defects of the SMEs themselves directly affect the development and growth of enterprises, especially after the financial crisis, China’s SMEs drawbacks exposed to the brink of bankruptcy, some SMEs is in the post-crisis devastated in the crisis, even there are a considerable part of the listed SMEs directly labeled St and PT, facing the risk of restructuring or delisting, and investors suffered greatly. Therefore, not only large companies call for improving the corporate governance structure, but also the SMEs for the growth.Creditor governance is one of the outside governance structure as equity governance, we can say that the debt constraint is more stringent than the equity constraints, especially with respect to large businesses, due to its inherent high-risk, SMEs face harsher restrictions than large enterprises with the use of debt, we predict that creditor governance will exhibit relatively good governance role with the SMEs. From this point of view, we select the listed SMEs as the research object, the relationship of creditor governance and growth of the listed SMEs as. the research topic, using empirical data to investigate the performance of the creditor governance in China’s listed SMEs.At present, China has not yet formed a more systematic theoretical system in the governance of creditor, the paper will carry out the analysis of the role of creditor governance drawing on the basis of the theory of foreign study, and construct a comprehensive evaluation system for three characteristic factors of creditors governance and a total indicators of creditors governance based on eleven financial indicators with the use of factor analysis, and then use a regression model for statistical analysis inspect the relationship between creditor governance and the growth of the listed SMEs, and make some recommendations based on the empirical results at last.Specifically, in the theoretical study, the first title of the article defined a concept with the three key words-the listed SMEs, the company’s growth and creditor governance, and reviewed some basic theories of the company’s growth and creditor governance, the basic theories of the company’s growth include the theory of exogenous factors, the theory of endogenous factors and the theory of the life cycle, and the basic theories of creditor governance include the theory of agency cost theory, theory of control and theory of signal transduction. Then we analyzed the characteristics factor of creditor governance:the degree of liability financing, solvency and debt maturity structure, providing theoretical support for the subsequent empirical assumptions, we believe that creditor governance will has a different performance with different arrangements of the above three characteristics factors.In the empirical study, we established a regression model to inspect the above theoretical research. First, we proposed a main assumption and three sub-hypotheses:H:There was a positive correlation between creditor governance and the growth of the listed SMEs. H1:There was a positive correlation between the degree of liability financing and the growth of the listed SMEs. H2:There was a negative correlation between solvency and the growth of the listed SMEs. H3: There was a positive correlation between debt maturity structure and the growth of the listed SMEs.We used the data of2009-2011with eleven selected financial indicators calculate the values of three characteristic factors, and calculated the total indicators of creditors governance with weighted average method and by the contribution rate of each characteristic factor, then ranked the listed SMEs with the total indicators. Finally, carried out the regression analysis of the total indicators and the three characteristics factors of creditor governance as independent variables and the main business revenue growth as dependent variable, its conclusions are as follows:(1) There exists significantly positive correlation between the total indicators of creditor governance and the growth of the listed SMEs, proving the creditor to play a governance role in the listed SMEs, the governance of creditor is able to promote the growth of the listed SMEs. Therefore the listed SMEs should raise concern to creditor governance and improve the governance structure of creditor, to promote the company’s growth.(2) There exists significantly positive correlation between the degree of liability financing and the growth of the listed SMEs, indicating that the "hard constraints" role in the liabilities financing through debt covenants to produce a positive impact on the company’s growth. On the one hand, the degree of the SMEs’liabilities financing in our country is generally low, and not yet achieves the optimal level of the liabilities financing, and there is a great enhance of the space to liabilities ratio, therefore improve the degree of liabilities financing is able to promote the growth of the company; on the other one hand, relative to large enterprises, as vulnerable groups during the liabilities financing process, SMEs face more stringent restrictions and constraints than large enterprises, and debt financing "hard constraints" and the governance mechanisms of creditor perform better in SMEs. The company managers in SMEs will work harder to avoid bankruptcy, thereby contributing to the company’s growth.(3) There exists a weak negative correlation between the solvency and the growth of the listed SMEs, proving solvency inhibit the company’s growth to a certain extent, but the overall performance is not obvious, the current level of solvency does not have much impact to the company’s growth. Maybe because of the relatively modest of the solvency, and better matching of current assets and current liabilities, also the cash flow in companies is low which limits company managers the abuse financial flows. But to some extent, it will also affect the credibility of the company’s debt financing.(4) There exists significantly relationship of inverted "U"-type between the growth of the listed SMEs. In other words, there is an optimal ratio for the long-term debt to promote the company’s growth, before the optimal ratio, the long-term debt will play a governance role, greater than it, the governance role of long-term debt is weakening. However there are more than90%of the company on the upswing of the "U" type curve stage of in the entire sample, Therefore we can think that the debt maturity structure is in promoting to the company’s growth overall. That is to say, with respect to the short-term debt, the long-term debt has a stronger the governance to the growth of the listed SMEs. In practice, due to the short period, and the high cost of participation (such as looking for a customer costs, the cost of negotiate and the contract), creditors lack motivation to supervise company’s managers. While due to the long duration, and the large amount of the borrowing, the creditors faced with the high risk of the loss of funds with the long-term debt. Therefore it is easier to arouse the governance enthusiasm of the creditors. Currently, China’s listed SMEs have Low debt maturity overall, the vast majority of the company in favor of short term debt, and long-term debts turned bank borrowings, which is mainly caused by unsound long-term debt market.In finally, combined with China’s institutional context and economic environment, we propose some suggestions to optimize creditor governance:(1) improve the bank system, reshaping the relationship between banks and companies;(2) improve the legal system of bankruptcy, achieving debt camera control;(3) accelerate the development of the corporate bond market, broadening the financing channels of liabilities;(4) accelerate the development manager market, perfecting the mechanism of credit and governance constraints;(5) focus on corporate governance characteristics of debt, arranging for debt financing structure reasonably.