Theoretical And Practical Analysis Of Mezzanine Financing In SMEs Of Our Country

As one of the newest method of financing, mezzanine financing plays a great role in Chinese domestic SMEs' financial market, this has got a big gap among the SMEs financing. First, based on the company financing theory,we analyze the causation of the difficulty in SMEs financing and the economic reasons about using mezzanine financing in China. Second, a dynamic game is built to analyze the influence of the cost, risk and size on the financing choice of companies. On this base, we further combined the panel data across 615 programmes of 86 companies in China from 1994 to 2006 to study empirically about our theoretical conclusion.We have found out that the coefficient on the project size variable is positive and strongly significant, a large project size increases the likelihood of mezzanine financing; an increase in the project risk decreases the probability of mezzanine finance; while higher financing cost decreases the likelihood of mezzanine finance. There is a negative relationship between the cost of the firm and likelihood of getting mezzanine financing for the project.