Study On The Risk Of China’s Small-and-Medium Enterpries’ Credit Guarantee Institutions From Asymmetry Information Perspective

Currently SMEs have become an important part of our national economy, play an active role in many fields,such as expanding employment, increasing Tax, exporting, promoting innovation and so on,but the finance difficult restricting its further development. Since SMEs are lack of collateral and its financial transparency is poor, "Macmillan Gap" is still a widespread, serious problem now. SME credit guarantee organizations(SCGOs) enhance the SME credit rating and expand bank loans, promote the general welfare of society Pareto improvement, but the credit risk continue to accrue upon SCGOs.Firstly, by the Asymmetric information theory, this article analysis the reason of SMEs "credit rationing" from adverse selection and moral hazard, proposing the way of mitigating "credit rationing"-SCGOs.Secondly it focus on the causes and control methods in SCGOs’risk.From the outside, information asymmetries is still existing between SMEs and SCGOs, adverse selection, moral hazard are still existing.From the inside, information asymmetry exist between shareholders and managers,and it will make managers select high-risk projects in the security practice.After the study of the cause of risk, the article suggested that using a flexible combination of contract, building re-guarantee system and manager ownership should be used to response on the risk of SCGOs. Thirdly the SCGOs’ industry practice in China were investigated.In the case of asymmetric information, through analysing the SCGOs’risk from the analysis of theory and practice, the paper concluded with the view:1. In the credit guarantee market, SCGOs’guarantee rate can not be used alone, it will increase adverse selection and moral risk.2. The different risk types of SMEs have the different marginal rate of substitution between guarantee rate and the value of counter-security measures.3. The bank requires SCGOs improving the guaranteed proportion will reduce the average probability of success, increasing the risk of the SCGOs. 4. Re-guarantee mechanism can enhance SCGOs’institutions, expanding the credit guarantee institutions to provide credit amount, and can shift some risk.In the mechanism, the Government play an important role.5.Because of the information asymmetry between shareholders and managers, managers’effort will decrease and moral hazard will more likely occur.