An Empirical Analysis On The Effect Of Asset Specificity On SME Board Enterprise’s Financing Structure

Small and medium-sized enterprises play important roles in the economic life,but the difficulty of financing has affected its’ long-term development. Assetspecificity is an asset when its value in one use is much higher than in other uses, theasset has asset specificity in this use. Degree of asset specificity increases constantlyin small and medium-sized enterprise, the asset specificity will influence financingstructure by influencing financing cost, so exploring on financing structures based onasset specificity is also important.The study of this paper combined theory analysis with empirical research. Firstly,defining what is asset specificity, former research on financing structures of small andmedium-sized were reviewed and appraised according asset specificity. Then relevanttheories were used to analyze the influence of asset specificity on financing structures.Thirdly, the model “cost of capital” was introduced to analyze the effect of assetspecificity on the debt financing costs and the equity financing costs, the result canprovide the theory basis for later empirical assumptions.In empirical analysis part, this paper chose380SME board enterpriserepresenting small and medium-sized enterprises. With descriptive statistics and linearregression, this paper drew conclusions below:(1) Asset specificity is significanteffect on financing structures of small and medium-sized enterprises, the higher theasset specificity, the lower the the corporate debt ratio.(2) Proprietary assets of smalland medium-sized enterprises can’t influence financing structures by internalfinancing.(3) Proprietary assets of small and medium-sized enterprises increaselong-term investors, the higher the asset specificity, the higher the proportion oflong-term debt ratio. Combining actual conditions, this paper proposesd solutionbased on government and enterprise. The government would combine financialsupport with policy support, establish and improve the specificity of assetmanagement operation mechanism. The enterprise would build modern enterprisessystem, perfect the corporate governance structure, improve the management level ofsmall and medium-sized enterprises. This paper’s theory interpretation and empirical analysis of the influence offinancing of small and medium-sized enterprises based on asset specificity haveimportant meanings to asset specificity theories system and expand research scope ofguidance of financing behavior by asset specificity, also to provide advices to helpsmall and medium-sized enterprises to solve the financing difficulties.