Research On Financing Behavior Of Private Small And Medium-Sized Enterprises Owner In China

Private medium and small enterprises (SMEs) in China hold the more and more prominent status in our social economy. At present, there are over 5.5 million private SMEs in China, accounting for more than 80% of the total number of the national enterprises. With 26.21 million family firms, this number accounted for 99%. It absorbs more than 70% of new jobs and creates more than 90% of new employment, which increasingly becoming a platform of initiating career and obtaining job opportunities for most Chinese people. In addition, SMEs are much more adaptable to new trend of the new technological revolution based on the information technology and biological technology, providing about 70% of the technical innovation, 65% of the invention patents and over 80% of new products, as the main R&D position of independent innovation. Therefore, the healthy development of private SMEs directly related to the employment of the masses of people, the national income distribution, and even related to the stable development of the national economy.However, in the process of establishment and development of private SMEs, difficult financing is always a primary restrictive factor which is difficult to resolve. Nearly 70% of the enterprises reflect the difficulties of financing. This number is higher than it in developed countries, and also much higher than it in the new industrial states of Asia. Funds are blood of the enterprise, which are the first and constant forcing power to the enterprises' business activities. Thorough study of private SMEs' financing problems, as well as relevant policies and institutional arrangements are of great significance.In accordance with the development venation of mainstream financing theory, this paper give a systematic account of related theories at home and abroad, and also analyze the applicability of the mainstream financing theory in the financing area of the private SMEs. It is found that the theory of mainstream financing can't completely apply to the deep understanding of the private SMEs' financing. We must transform our perspective and make a thorough investigation and study on the internal characteristics and the external survival environment. From the financing perspective of the owners of private SMEs, this paper classified the financing of the total private SMEs into three types first: not have to, not willing to and can not obtain external financing. Then, starting from the operation features of enterprises, it used big-sample data to analyze the case and the influencing factors of the enterprises to which financing are not necessary; Starting from governance characteristics of private SME, it demonstrated the characteristics of not willing to absorb exogenous financing and factors which infuse the will of external stock financing; Starting from the characteristics of match information between the private SMEs and governance model, it studied the company's financing capacity.In the part of discussing how to ease the financing difficulties, this paper first discussed a variety of theories of solving the financing problems of private SMEs and their limitations in the economical standard "anonymous" hypothesis, which based on the rational behavior of economic man, and starting from the participation and incentive compatibility constraint. Then, it abandoned anonymous assumptions of transactions, proposed the financing model involving the role of trust. Then using the personal network theory, according to the Chinese people's trust structure, it divided the potential financing subjects of the owners of private SMEs into two types: the inside and outside of the "circle". It involved the trust and asymmetrical information to discuss the variety of the balanced relationship under financing situation of internal and external of circles respectively, and empirically analyses the influence of political participation of the company owners on the capital structure.This paper has certain innovation in the aspects of study angle, research methodology, research data and the views. First, this paper discussed the financing problems from the prospect of company owners all along. It unified the behavior of the main micro subject to the analysis framework based on modern company's financial theory and embedding theory of economic sociology. This perspective of the study of the problem is unique. Second, starting from a basic mathematical model, through the change and extension of premise conditions, the paper discussed the financing capacity of enterprises and various strategies aimed to improve the financing capacity with mathematical economics model. It constructed the theoretical model between the trust and financing structure, as well as various equilibrium models of inside and outside of financing and lending circle. It estimated the relation between financing needs, political participation and loans of state-owned banks with tobit model; It also estimated the enterprises' will of stock financing with probit model and so on. The research method is normative. Third, it is the first time to make a comprehensive analysis of national private SMEs with big-sample data of nationally representative. This paper research is unique in the area of research data. Fourth, through dividing the financing of enterprises into three kinds (not have to, not willing to and can not financing), this paper investigate these three kinds of cases and making deeply analysis of their influence factors. With the organic combination between social network theory and corporate finance theory and the dividend of financing into insiders and outsiders, it introduced asymmetric information theory and trust factor to effectively explain the reality of most financing exist in the interpersonal networks of business owners, and a few large enterprises monopolize a large number of financial resources.The main conclusions of the study are as follows:1. Most private SMEs mainly rely on internal financing, but also the distribution of external financing in the private SMEs is highly uneven, 5% of enterprises monopolize about 60% of the total credit. From the point of financing demand, the operating characteristics of non-development means that not all enterprises have financing demand. Many private SMEs are only to maintain their existing scale and good business situation. They do not need constantly external financing to fund. From the point of financing will, the preference of control right, cased by the personal and family management, affected the will of foreign equity financing. In China, there are about 70% of owners of private SMEs do not want to obtain funds through equity financing.2. The private SMEs' fuzzy and hidden information feature is the main reason for credit rationing. The inherent fuzzy and concealed information feature of the private SMEs which is endogenous of governance structure, the moral hazard, the difference of subjective probability estimate and the adverse selection and so on, they all led to greater financial constraint because of insufficient financing capacity of private SMEs, despite they have financing will. Mortgage guarantee, the much lower asset specificity, reputation capital, the rising degree of altruism, mutual supervision based on the cost small enough , cross supervision with joint liability, the cross mortgage under diversification and the ability of implementation of financing contract are all good for enhancing the financing capacity of enterprises. But each strategy of improving the financing capacity of business owners has its deficiency, such as the mortgage guarantee and credit policy which is excessively strict and single, is thought as the main reason of financing problem for the owners of private SMEs.3. The main reasons of financing in interpersonal circle are the more symmetrical information and greater trust. The network and diversity-orderly structure and trust of business owners are key factors which affect the availably of financing. Almost all of the funds are dependent on social network, with a minor part from "anonymous" trading. The political participation of business owners is positively correlated with the credit from state-owned bank. Private business owners obtain funds through both congenital and acquired "circle". The financing of inside-system business owners comes from the formal financial system, which relied on their relations with government officials or government entrepreneurs. Inside-system owners of private enterprises have also been actively involved in political participation, which further enhancing their formal financing capacity by acquiring political status.