In financing activities, information
asymmetry between SMEs and investors is widespread. SMEs own relatively
complete information about their future profitability. Whereas, the investors
are often difficult to fully grasp the future profitability of SMEs, which
means that they have incomplete information (Gao, 2011). This paper analyzes
SMEs’ financing problem from two perspectives: dynamic game of complete
information and dynamic game of incomplete information. On the basis of the
above analysis, it tries to identify the main reasons and viable solutions to
change the status quo in SME financing.
The financial system must be established and
improved in enterprises to ensure financial information is truthful, accurate and
complete, enhance the transparency of financial information. A good image
should be established by means of passing real and complete information to the
bank through effective way. From long-term perspective, cooperative
relationship between banks and enterprises should be established. This
relationship is helpful to reduce financing costs, increase credit profits,
evade credit risks, and enhance the competitiveness of SMEs in China.
Article by Pingzhong
Lin,from Jimei University, Xiamen, China
Full access: http://mrw.so/2ohg04
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| Image by BizSmart Finance,from Flickr-cc |
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