Research On Effects Of Trade Credit Reducing The SMEs’ Credit Constraints

In the process of operating, most corporations are suffering from credit constrains. But the worst are not listing corporations in China, SMEs are difficult to have credit, whose assets are relatively light, whose collateral available are less, and who lack credit guarantee of high grade. Can trade credit alleviate credit constraints of SMEs? By what way does it play a role? Are there any significant differences in the effect on different types of enterprises? There lacks systematic study in depth on these issues. Focusing on the above questions, this paper studies the different effects of commercial credit on easing financing constraints.First, through the analysis of the mechanism of trade credit reducing credit constraints, We explore the two path of trade credit alleviating credit constraints. The trade credit ease credit constraints by the replacement of bank loans, combining with the theory of asymmetric information and principal-agent theory. Then through the credit rationing and the buyer market theory we obtain the second path of trade credit easing financing constraints, by enhancing the competitiveness of enterprises trade credit form complementary effect with bank loans. Second, according to the investment-cash flow sensitivity theory and previous research results, a regression model is built to verify the above theoretical hypothesis. The paper uses Industrial enterprise database of China from 2004 to 2009. The sample of SMEs is selected to be studied. The results show that the SMEs generally suffer from the obvious credit constraints, but trade credit can effectively reduce the credit constraints through two kinds of effects. And grouped in different enterprises, Medium-sized enterprises reflect the strong complementary effect. And non state-owned enterprises’trade credit of the substitution effect is stronger. In the Central and Western regions, enterprises obtain funds more difficult, but it can be effective to use trade credit transfer a positive signal, so as to enhance the competitiveness of enterprises, the substitution and complementary effects are strong And export enterprises in the use of commercial credit ease financing constraints can reflect the strong complementary effect, so as to solve the problems encountered in the domestic business. Finally, this paper proposes the construction of diversification finance, open financial markets and other policy recommendations for the real economy of the steady transition to provide theoretical support.