Financing Analysis With Guarantee Debt And Information Asymmetry

The financing difficulties and high financing cost of private enterprises,especially small and medium-sized enterprises(SMEs)are open problems over the world.For these issues,credit guarantee schedule is generally regarded as effective means to support the financing of private enterprises in the world.According to data published by World Bank Enterprise Surveys,guaranteed loans account for 79% of all loans.Due to the imperfection of bank credit system,Chinese insurers have made many innovations in guarantee mode.Taking Shenzhen High-tech Investment Group Co.,Ltd.as an example,in practice of guarantee,entrepreneurs innovated and promoted a series of guarantee modes,such as Equity(dividend)-for-Guarantee Swap,Option-for-Guarantee Swap and so on.However,the theoretical exploration of relevant guarantee is far behind the needs of reality.According to the financial theory,high risks should have high returns,so it is inevitable for high-risk private enterprises to undertake expensive financing cost appropriately.However,to some extent,the financing difficulties and high financing cost of private enterprises are caused by the lack of market functions.Among them,information asymmetry is the main reason.For that,the insurers can alleviate information asymmetry between the financiers and investors to some extent by professional advantages.But it is almost impossible to eliminate information asymmetry completely.This is why this paper study credit guarantee based on asymmetric information.This paper establishes the guarantee pricing model to make a quantitative analysis of the guarantee mode and gives theoretical proof.It not only develops the guarantee theory under the condition of asymmetric information,but also gives policy suggestions on the design of guarantee mode and financing guarantee preference.This paper presents the economics of credit guarantee and develops a singleperiod guarantee pricing model to characterize the swaps of the Fee-for-Guarantee Swap(FGS),Equity-for-Guarantee Swap(EGS)and Option-for-Guarantee Swap(OGS).This paper uses equilibrium pricing method to reveal the economic law of the influence of information asymmetry on social welfare,gives the conditions of social welfare transfer and social welfare loss,and explores the financing guarantee preference of heterogeneous enterprises.We show that information asymmetry benefits low-profit enterprises or insurers at the expense of high-profit enterprises with the highest degree in OGS,the second in EGS and the lowest in FGS agreement.There are two equilibria: One is the pooling equilibrium where high-profit enterprises are forced to transfer part of profits to low-profit ones,of which only a negative net investment value of a low-profit enterprise induces a social welfare loss;The other is the separating equilibrium,where high-profit enterprises transfer part of profits to insurers instead of low-profit enterprises.There is a possibility that the net present value of a high-profit enterprise increases with investment costs.The paper explains why a high-risk firm is difficult to get finance with the help of guarantee swaps.