Information Characteristics Of Sme Financing And Multi-level Capital Market System Construction,

Berger and Udell proposed a theory of financial growth cycle, which systematically analyses the dynastic change of medium-small sized firms' financial structure in each growth stage. They argued that information condition is relevant to medium-small sized firms' financing. The statistics from America support the truth of their theory, which is also supported by the evidence from China. So, it is practical to analyse the problem of medium-small sized firms' financing in the basis of the theory of financial growth cycle. However, their research only reveal the phenomena which is merely the initial stage of the solution to the problem. For my part, it is necessary to analyse the cause that results in information change. The theory of information production and architecture argues that when information is soft—that is, information that cannot be directly verified, decentralization has the advantage over hierarchy. When information is hard—that is, information that can be directly verified, hierarchy has the advantage over decentralization.This paper combines the theory of financial growth cycle and information production and architecture to analyse the information types of the medium-small sized firms. Finally, the paper puts forward two propositions.Proposition 1: Architectures at different growth stages of the medium-small sized firms form a continuum. At the initial stages, medium-small sized firms adopt decentralization while hierarchy at the following stages.Proposition 2: Information types at different growth stages of the medium-small sized firms form a continuum. At the initial stages, medium-small sized firms have the advantage with soft information while hard information at the following stages.The paper analyses the cause of the financing difficulties of the medium-small sized firms based on the proposition 1 and proposition 2.Under competing economy, exchanges will be efficient when the architectures of exchange parties can match the information types each other. The financing difficulties are the result of failing to match between architectures and information types. Only the institutions that have the advantage with soft information can completely solve the problemProposition 3: Under competing economy, when exchanging with the organization that has the advantage to produce soft information the organization with...