Abstract

Financing situation and countermeasure research of Chinese small and micro enterprises under incomplete information

Author(s): Qian Ma

Compared with those large and medium-sized enterprises, small and micro enterprises (SMEs) in China face conspicuous financing disadvantages at present. The financial institutions are more apt to finance large and medium-sized enterprises, but strict with the small and micro ones. Therefore, most of them have no choice but to apply to internal financing. However, the small and micro enterprises make increasingly less profits and their internal financing ability gets increasingly weaker with the process of financial crisis. They are now struggling in severe financing troubles. The research, from the view of incomplete information, focuses on the financing sources, channels, and proportion of small and micro enterprises. Thus, it concludes that the main financing problems among those enterprises are insufficient knowledge of financing policies, the information asymmetry with financial institutions, and the information asymmetry within enterprises. Aimed at these problems, the research puts forward some corresponding solutions as follows. First, relationship lending should be developed. It sets its goal at the information asymmetry between small and micro enterprises and financial institutions. Second, credit information management should be strengthened upon small and medium-sized enterprises. This is intended for the information asymmetry between SMEs and the government and financial institutions. Third, managers of small and micro enterprises should know more about the enterprises. This is designed for the information asymmetry within enterprises and that between them and the government.