INNOVATIVE SOLUTIONS: LEVERAGING DIGITAL FINANCE TO ADVANCE SMES' FINANCING AND EQUITY
Authors: Chen Wei, Ming Yang
Published: June 2024
Abstract
<p>The issue of financing constraints has long plagued small and medium-sized enterprises (SMEs), despite their significant contributions to China's economy, as highlighted in the 2021 China SME Financing Development Report. These SMEs account for a substantial portion of GDP, employment, market share, and tax revenue. Nonetheless, financing constraints persist, particularly in the context of equity financing. Zhang et al. (2021) have noted that listed companies in China face varying degrees of financial and equity financing constraints, significantly impeding their further growth. This phenomenon stems from multiple factors. One key challenge arises from the fact that many micro, small, and medium-sized enterprises in China fail to meet the stringent listing standards, restricting their access to equity financing and, consequently, hindering their development. Additionally, investors, when considering equity financing, tend to favor larger enterprises and established stocks due to the relatively lower information transparency and uncertain growth prospects associated with micro, small, and medium-sized enterprises. This preference further exacerbates the financing challenges faced by SMEs. This paper delves into the multifaceted nature of SME financing constraints in China, shedding light on the complexities of the issue and proposing potential solutions to empower the continued growth and development of these critical economic actors.</p>
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