Influence Of Disclosure Quality,Analyst Following On Financing Constraints

Small and Medium Enterprises (SMEs) play an indispensable role in economic society. They can promote economic development and create a great of jobs. However, financing constraints has been restricting the development of SMEs. Many studies have shown that the root cause of financing constraints is information asymmetry. Improving the quality of information disclosure and increasing the number of analyst following are two important means to reduce information asymmetry. Domestic studies about the effects of information disclosure quality and analyst following on financing constraints are mostly for main board market, and less specifically for SME board. Furthermore, most of researches on main board market study the two variables separately.There is little literature to explore whether the two variables can promote each other’s effects of easing financing constraints. In addition, analyst following is just studied for a short time because of Chinese securities analysts started late. Empirical studies about analyst following appeared from 2004. Also the impact of analyst behavior is still controversial and questioned because of the problems appeared during development of analysts. Therefore, this paper chooses SME board listed companies to represent SMEs and researches if information disclosure quality and analysts following can alleviate financing constraints.The paper brings information disclosure quality and analyst following into Tobin Q investment model and examines the sensitivity between investment and cash flow to explore if information disclosure quality and analyst following have influence on financing constraints. Using Shenzhen Stock Exchange information disclosure rating and earnings smoothness to measure information disclosure quality and using the number of analyst following to measure analyst following variable, the paper uses data of SMEs to do the empirical research. The data includes 685 companies listed in SME board from 2006 to 2013 for a total sample of 2731 observations. The empirical results show that:although the country has attached importance to SMEs financing constraints and takes a series of measures to alleviate them, there are still financing constraints in SME board listed companies; no matter using information disclosure rating or using earnings smoothness to measure information disclosure quality, the improvement of information disclosure quality can help to ease SME board listed companies financing constraints problem; the increasing of analysts following number can ease the problem of information asymmetry, and thus ease the financing constraints by analysts discovering and delivering more corporate information; in addition, information disclosure quality and analyst following can enhance the effects of easing financing constraints of each other’s. The above results are still robust when tested by other methods.Therefore, to further ease financing constraints, we should improve listed companies information disclosure system, while specification and accelerate the development of analysts. So they can play a greater role in alleviating the problem of financing constraints.