Management Research News

An empirical evidence of small business financing in China
Junjie Wu Jining Song Catherine Zeng
Article information:
To cite this document:
Junjie Wu Jining Song Catherine Zeng, (2008),"An empirical evidence of small business financing in China",
Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT)

Management Research News, Vol. 31 Iss 12 pp. 959 - 975
Permanent link to this document:
http://dx.doi.org/10.1108/01409170810920666
Downloaded on: 01 August 2015, At: 06:31 (PT)
References: this document contains references to 78 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 4972 times since 2008*
Users who downloaded this article also downloaded:
Javed Hussain, Cindy Millman, Harry Matlay, (2006),"SME financing in the UK and in China: a comparative
perspective", Journal of Small Business and Enterprise Development, Vol. 13 Iss 4 pp. 584-599 http://
dx.doi.org/10.1108/14626000610705769
David Irwin, Jonathan M. Scott, (2010),"Barriers faced by SMEs in raising bank finance",
International Journal of Entrepreneurial Behaviour & Research, Vol. 16 Iss 3 pp. 245-259 http://
dx.doi.org/10.1108/13552551011042816
Nikolaos Daskalakis, Robin Jarvis, Emmanouil Schizas, (2013),"Financing practices and preferences for
micro and small firms", Journal of Small Business and Enterprise Development, Vol. 20 Iss 1 pp. 80-101
http://dx.doi.org/10.1108/14626001311298420

Access to this document was granted through an Emerald subscription provided by emerald-srm:537778 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.

*Related content and download information correct at time of download.

Findings – The data gathered covered current topic in research including the capital structure of SMEs at start-up. the issue is pp. Leeds Metropolitan University. the preference of financial resources as SMEs grow. the types and extent of funding shortage. These include findings. 31 No. Management Research News Vol. Capital. Leeds. private SMEs have made an outstanding contribution to China’s sustained and rapid economic development in recent years. People’s Republic of China. Borrowing Paper type Research paper Introduction A healthy and robust small and medium-sized enterprise (SME) sector is vital for sustainable competitive advantage and economic development in both developed and newly industrialized countries (NICs). After a period of dominance by state-owned enterprises (SOEs) in China.6 per cent of Chinese gross domestic product (GDP). SMEs represent 99. UK Abstract Purpose – The purpose of this paper is to provide empirical quantitative evidence concerning small business financing in China and highlight the financing problems faced by small to medium-sized enterprises (SMEs) in developing their businesses. Keywords China. Therefore. The current issue and full text archive of this journal is available at www. Originality/value – The results from this study contribute to the understanding of current problems in financing Chinese small business enterprises. the command economy saw SOEs # Emerald Group Publishing Limited 0140-9174 dominate the industrial landscape. These organisations were high up on the political DOI 10.1108/01409170810920666 . This is especially the case for NICs in transition from a command to a market economy.2 per cent of tax revenues and 75 per cent of employment opportunities in cities and towns. Research limitations/implications – The sample size is relatively small and statistical analysis is relatively straightforward. which were not presented in other similar studies. the significant factors. which help SMEs secure bank loans and the influence of a firm’s size.3 per cent of exports. 12. Descriptive methods and the SPSS statistical software package were used to analyse the data and interpret the results.com/0140-9174. According to China’s National Development and Reform Committee (NDRC. London. and Catherine Zeng Deloitte Touche Tohmatsu LLP. Design/methodology/approach – A semi-structured questionnaire survey was conducted to collect data from a sample of 60 small businesses in three cities in China. Central University of Finance and Economics.3 per cent of the registered enterprises in the country and account for 55. However.htm An empirical evidence of small Business financing in business financing in China China Junjie Wu School of Accountancy and Financial Services. Practical implication – The present study will be of interest to policy makers developing new strategies and policies to support the financing of SMEs in China. 46. 2006). The findings generally support financial theories and previous studies about SMEs but also offer the basis for new arguments about financing SMEs in China. age and the like. 2008 The difficulty of financing SME growth is a universal problem. Due to history. SMEs have been of primary interest to the policy makers in these countries. UK 959 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Jining Song Business School.emeraldinsight. Beijing. 959-975 particularly poignant in China. Financing. Small tomedium-sized enterprises. 62.

Against this background. Literature review A number of features distinguish small businesses from large firms in the context of financial management practices (Ang. change is still required in institutional services. SME financing remains one of the most under-researched areas in China. The Commission promotes the establishment of service agencies for SMEs and seeks to improve the approval process for guaranteeing loans to SMEs (http:// c. In Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) response to the need to change and promote growth among SMEs in China. 2002). However. the taxation regime 31. This research seeks to contribute in this strategic area. the credit guarantee agencies funded by the government were established to assist SMEs raise funds from financial institutions. To achieve this end. marketing and technical expertise.cn/catalogdetail. Stakeholders of SMEs find they are discriminated against by a lack of access to external funding. long-term loans and venture capital) and a lack of managerial. One of MM’s propositions suggests that the value of a company . uncertain property rights protection.jse). despite some improvement. small businesses are not publicly traded and rely mainly on private equity and debt markets to raise capital. including scarcity of long-term financial resources (for example. the government promulgated several laws including the Law of Small and Medium Sized Enterprises in June 2002. financial. enterprise development oriented toward industrial training. At the municipal level. which has been extended and developed by a number of academic researchers.dl.. entities like the Dalian Municipal Economic Commission view their role in formulating development planning for SMEs very seriously. the murkiness of information. a questionnaire survey was administered to a sample of 60 small businesses in China examining issues including the capital structure at start-up. In addition.en. under-developed 960 regulative bodies and law enforcement mechanism (Poutziouris et al.gov. the increasingly important role of SMEs in the Chinese national economy also makes it one of the most interesting areas to study. However. Transaction costs in small businesses are usually higher than those costs in the large enterprises. questions remain unanswered concerning the actual success of the government’s initiative and the extent of the financial constraints that hinder SME expansion and growth. SME development in China today faces serious constraints.12 and market opportunities. MRN pecking order. These enterprises are normally owner–managed and the owner-managers generally possess general rather than specific expertise. Nevertheless. the financing pecking order in the growth period. For example. Capital structure theories and financial growth circle model Capital structure theory stems from the work of Modigliani and Miller (MM) (1958) on optimal capital structure. the percentage of exercised bank loans and the important factors that determine the approval of such loans. the categories and extent of funds shortage. 1991). In this context. The main objective of the study is to provide some preliminary descriptive evidence of SME financing. a lack of detailed micro- economic data on the small business sector and the funds SMEs raise in private equity and debt markets have made small business financing one of the most difficult fields in which to conduct empirical research (Berger and Udell. 1998). Such laws were to provide clearer lines of legal responsibility in the sector. Below is an identification of the relevant literature and previous studies pertinent to understand how small businesses are financed.

is unchanged by the alternative mix of capital structure. Another important capital structure theory is Mayers’ (1984) pecking order model. 1987. In his opinion. When firms are in the smaller/younger/more opaque stage. the owner. venture capital and bank loans). 2003. Poutziouris and Chittenden. Jones. 1998. Gregory et al. 1979). then issuing equity (Cassar and Holmes. the MM model is the starting point for the researching financing in decisions about capital structure. Collins and Moore. at start-up. 1995. Dollinger. 1979. 2003). pay agency costs that are the costs to keep an agency relationship such as those between owners and managers or between owner/managers and their debtors in an additional form (Cassar and Holmes.. It results when the net value of investment is positive. Therefore. trade credit and/or finance from a guardian angel. Among the studies cited above. which suggests that firms have a particular preference order for their financing choices. new shareholders and lenders). Titman and Wessels. short-term debt over long-term debt and outside debt over outside equity in order to keep the original ownership and control of the firm intact. Gaskill and Van Auken. 1993). Berger and Udell. 1996. 1993. they must rely on initial finance (for example. age and information availability are far from perfectly correlated’’. Berger and Udell (1998) also indicate that ‘‘the growth cycle paradigm is not intended to fit all small businesses and that firm size. 2005). issuing debt. Van Auken and Neeley. gains further experience and becomes more transparent with its information. firms gain access to intermediated finance from both the equity and debt side (for example. 1981. family or friends provide funds). Jensen and Meckling’s (1976) agency theory provides further insight into the China financial management of capital structures (Gregory et al. Therefore. a firm must manage an agency relationship which is ‘‘a contract under which one or more persons (the principal[s]) engage another person (the agent) 961 to perform some service on their behalf which involves delegating some decision- Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) making authority to the agent’’ and consequently.. Kimki. The firm will prefer inside finance to outside debt. Coleman. According to Jensen and Meckling (1976). 2003). Many researchers have examined the capital structure decision from the perspective of small firms (for example. 1964. However. This is because problems related to financing arising predominantly in small businesses and many failures in small and young firms are caused primarily by the inadequate financial resources available to fund the start- up and growth stages (Terpstra and Olson. . managers know more about the firms’ value and prospects than new investors (for example. Berger and Udell (1998) further suggest that a firm’s financial needs and options lie on a size/age/information continuum. 2005). Barton and Gordon. firms may be able to gain access to public equity and debt markets. 1997. Berger and Udell’s (1998) financial growth model has attracted the attention of many researchers and has been accepted as a view of small-business capital structure (Gregory et al. Cassar and Holmes. grows. In the growth stage. due to the information asymmetry between the firm and potential financiers. 1988. Ferri. Welsch and White. the best financing pecking order of a firm would be inside finance. Wucinich. these new investors will expect a higher return on the capital they invest.. 2005. Although a perfect market Business condition does not exist. Their model proposes that small businesses have a financial growth cycle in which financial needs and options change as the firm starts-up. 1996. As they continue to expand. 1988. 1981. It is widely accepted by researchers that a capital structure decision between equity and debt in small businesses is partially different to large firms because of the transparency of information.

income potential. 1989). 1991) conjectures that these theories have very little relevance to capital structure decision-making in small 962 firms. 1998. especially external debt rather than external equity. Berger and Udell. Kimki (1997) explores the relationship between capital structure and types of Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) industry and his results demonstrate that a high debt ratio exists in firms in the machine. Through these mechanisms. They believe that ‘‘all of these elements may affect SME credit availability by influencing the extent to which the different lending technologies may be legally and profitably employed’’. Riding et al. Kimki (1997) and Barton and Gordon (1987) find that the life cycles of small entities influence their capital structure decisions. Other factors influencing a financial institution’s decision to grant (or not grant) a term loan include managerial strengths. the lending infrastructure ranges from the information. Binks et al. For example. Lending technologies include information on which financial institutions rely upon to determine the supply of debt finance to firms while simultaneously addressing opacity problems. Westhead and Wright. The other is relationship lending that is largely based on qualitative information (that is.. 1994). potential of a project and even geographical location (Haines et al. tax. (1990) argue that . mainly based on large listed firms (Cassar and Holmes. 1994). information gathered through continuous contact with the firm that wants the provision of financial services (Allen et al. According to Berger and Udell (2006). Jones (1979).. judicial and bankruptcy environments to the social and regulatory environments. Titman and Wessels (1988) and Homaifar et al.12 Dollinger (1995). deposit and related financial services than do other financial institutions (Berger and Udell. Current framework of lending technologies consists of two categories. As a result. (1996). government policies and financial structures influence the level of credit available (Berger and Udell. therefore. MRN Other empirical studies on SME finance either fully or partially support or reject those capital structure theories and models. strength of market. medicine and electronic power industries. 1995. firms of this type become dependent on the availability of external sources of finance. The absence of adequate funding represents a major obstacle to a firm’s survival and chance of success during this start-up period (Hanson. (1994) suggest that a positive correlation exists between firm size and capital structure. legal. Financial theories have traditionally been developed to explain capital structure with empirical evidence. 2000). lending technologies and the difficulty of SME financing According to Cosh and Hughes (2000). Petersen and Rajan.. The evidence suggests that the vast majority of small businesses identify commercial banks as their primary loan lenders. 2006). transaction. Norton (1990. However. attracted a number of studies focusing on gathering empirical data from small firms to explore if these arguments are also valid when applying them to institutional and large-scale settings. 1991. 1983. The access of SMEs to external finance has attracted much attention from academics and policy makers worldwide. asset-based lending and financial statement lending). The literature has. Poutziouris et al. food. 1998. the majority of SMEs have experienced rapid rates of growth and funding shortages during their embryonic years. Lending infrastructure. The availability of credit for SMEs depends significantly on the nation’s financial structure and its accompanying lending infrastructure and technologies. One is transaction lending. probably because commercial banks provide a wider range of credit. 2003). 31. Cole. reaffirming the pecking order hypothesis. which is based mainly on quantitative data (for example.

Carter and Joues-Evans. 2007). Apart from having a controlling equity stake. The situation can be explained by governmental interference.. the state holds a very influential position. Small business financing in China Since China’s Constitution acknowledged the private sector to be an integral part of the economy at the end of 1990s. SMEs are not publicly priced and their labour force. 2002).46 per cent of total banking assets (Cousin. although inefficient SOEs are partly responsible for the large volumes of non- performing loans (NPLs) in China’s SOCBs. it is difficult for these firms to convey quality and build up a reputation to overcome the information opacity surrounding their activities (Berger and Udell. 12 joint-stock commercial banks (JSCBs). OECD. operational and managerial decisions (Cousin. large SOEs still attract the majority of . 124 city commercial banks (CCBs).3 million registered private enterprises in China. a situation recognised decades ago in the report of the MacMillan Committee (1931). Today’s shortage of finance has been reported as a particular problem for SMEs in different stages of development and has attracted 963 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) much attention from government. 2007). consequently. the historical relationship between SOEs and the state-owned commercial banks (SOCBs) and China’s financial market environment. The under developed financial market. 2005). 1998). in June 2004. there were 3. and 113 rural cooperative banks (CBRC. 17 rural commercial banks. the state holds between 95 and 99 per cent of all banking assets directly from SOCBs and indirectly through local governments and SOEs from the JSCBs and the CCBs (Beckier et al. far from rewarding their contributions to the Chinese economy. 2006). also contributes to this level of discrimination (Podpiera. the government has gradually lifted barriers on the development of SMEs to enable small businesses to develop quickly and become the growth engine of the Chinese economy. 2005. However. 2004). SMEs are discriminated against in terms of their access to external funding because of the historical political pecking order of firms in China. ACOST. Most SMEs do not have audited financial statements. 8. either from internal or financing in external sources to exploit an opportunity. The Chinese banking system is made up of 5 large SOCBs. With this support. A finance gap arises because the demand China from small firms exceeds the willingness of financial institutions to supply the finance at the current market conditions. 3 policy banks. For example. suppliers and customers are generally kept private. which leads to the allocation of financial resources to the least efficient SOEs rather than most efficient private firms..1million people. which employed 47. 2006. small businesses continually complain about a competitive disadvantage because of Business their inability to raise funds (that is. This allows the state to permeate strategic. This refers to a situation where a firm has profitable opportunities but insufficient funds. Robson. While the four SOCBs account for 52. Poutziouris et al. This is especially the case following China’s WTO membership in 2001 (Chen. 2000. financial institutions use income-gearing approaches as basic criteria to evaluate potential loans by taking account of forecasted future income flows of enterprises. 1990. SMEs generated more than half of Chinese GDP (compared with only 17 per cent generated from SOEs) but received only 10 per cent of all bank loans in 2004 (compared with more than half received by SOEs) (PBOC. 2007). 42 urban credit cooperatives (UCCs). the so-called finance gap). On the other hand. The principal reason a finance gap exists in SME financing is that on the one hand. policy makers and academics (for example. the state also has provided generous financial support to financial institutions. For example.348 rural credit cooperatives (RCCs). 1984).

Banks certainly face a number of challenges in China. comments were collected from academics and practitioners concerning the questionnaire’s structure. In order to support SME development by improving their credit environment. The latter in particular poses an obstacle for the SMEs because many banks only accept very limited types of tangible fixed assets such as buildings or lease of land as collateral. the Chinese Ministry of Finance in collaboration with other government departments set up a SME loan guarantee system. Additionally. 2007. which represent a response rate of 60 per cent. suggests that the current SME development boom might slow down without a long-term. Wang (2004). 2001). medium and small- sized cities in China. During the questionnaire design stage. government intervention. content. systematic. But such a loan guarantee system has not played the role as originally intended. Descriptive statistical . such as insufficient capital. Jinan (the capital city of Shandong province. unified and relatively independent SME development strategy and a system governed by effective policies (2004). the Chinese financial market is an under-developed debt and capital market Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) with some peculiar features. 2007). a pre-test and a pilot study were conducted and the outcomes were considered carefully in order to improve the final version of the questionnaire. The immature financial system also places pressures on the banks. All questions in the survey were close-ended to limit the respondents’’ answers to the survey questions and encourage their focus on the issue at hand. Sixty questionnaires were completed and returned. This process established more than 200 credit-guarantee institutions with a fund of 10 billion Yuan. However. the fact that most of them are still in the early stages of their development means they lack formal structure. The cities concerned were Beijing (the capital of China). for example. Methodology and sample characteristics The approach to the research involved gathering data via a semi-structured questionnaire survey. larger SOEs and SOCBs have similar organisational structures and administrative styles. good governance and collateral. which is one of middle-developed provinces in China) and Liaocheng (a small city in Shandong province). poor risk management practices and high levels of liquidity caused by large numbers of NPLs. which were inherited from a time before the reforms that accompanied the open door policy. banks require more tools to control the veracity and completeness of the information submitted to them by SME borrowers – there is a lack of credit registries for small businesses in China. 2007). These factors influence the access of SMEs to bank loans because these assets would be required to enhance the creditworthiness of SMEs. The questionnaires were distributed and addressed to the owner or accountant of 100 SMEs in three cities of China in 2006 by mail and in person. This shared interest creates an environment where lending by SOCBs is still partially determined by political 964 reasons rather than by commercial motives (Cousin. For example. These cities are representative of large. today.12 is the high likelihood that failing SOEs will be rescued by the government if they are declared bankrupt (Cousin. wording and layout. A lack of assets limits the capacity of SMEs to obtain loan guarantees from the banks (Zhang. MRN bank loans because the risk attached to these loans are thought of as being low – there 31. 2006). Moreover. In this context. from the beginning in 1999. From the side of the SMEs. the sector stands at a crossroad and it is expected that the industry will shrink in the future as it re-focuses its strategy (Cousin. Park and Sehrt.

3 Collectively owned 8. 21 per cent from bank loans and rural Per cent (%) Per cent (%) Types of industry Numbers of employees Manufacture 23.0 Table I.0 100.3 Local 63.0 100. The findings are consistent with other studies in Western counties and in China. The questions supporting this Business study were drawn from a large survey (available for the corresponding author). These 965 owner/managers tend to possess relatively low education qualifications. methods were employed to analyse and explain the data.3 <100 51.7 4-6 year 28. 2000 and 2002 suggest that 65.3 Diploma 23.1 100.0 National 26.7 Limited liability Co. For example. which run businesses operating in local areas and employing fewer than 100 employees. indicate clearly that the key financial resources for the respondents at business start-up were the owner’s private savings.3 100.0 100.0 40-50 51.0 >11 year 20. financing in The characteristics of the sample are summarised in Table I. In China.0 >50 10.7 >500 15. The China SMEs are mainly family-owned small firms. Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Survey results and discussion Financial resources of start up One question concerned the financial resources at start-up.7 Construction 13.0 Master or over 15.0 100.3 100-300 25.0 100. Note: Sample number ¼ 60 Sample characteristics .7 Share holding corporation 5.5 per cent of capital originated from self-accumulation.0 Hotel and restaurant 13. the results from a series of surveys by the China Industrial and Commercial Union and the Research Commission of Chinese Private Business in 1993. Bank of England (2003) data suggest that 60 per cent of business owners used their personal funds and finance from family members as the main sources of capital to start their business.3 301-500 8. 61. Most of the SMEs are at the start-up stage with an owner/manager who is on average between 40 and 50 years of age.3 Partnership 10.3 30-39 30. 1995. The data indicates that a large proportion of the respondents are from wholesale and retail companies.0 First degree 30. money borrowed from family and friends and bank loans.0 100.0 Types of ownership Age of owners Individually or family owned 71.0 Wholesale and retail 33. 1997. shown in Table II.0 Others 5.7 <30 8.0 Types of trading Business coverage Sole trader 28.7 Up to high school 31.0 State owned 15.0 Years in business Qualification of owners 0-3 year 31.3 7-10 year 20. These results.3 Transportation 11.7 International 10.

These positive result. Categories and extent of funding shortages Another question inquired about the types and extent of funding shortages faced by SMEs. however. most SMEs encountered difficulties in accessing finance to support capital development and to provide working capital (Tucker and Lean. In the UK. Funds from internal employees 11 18.7 per cent of the respondents had access to a bank loan. 5. it is not surprising that the results indicate that the same owner/managers do not lack funds for the training and development of staff and expanding their market range.6235 5 Table III. summarised in Table III. relatives and 31. suggest that SMEs face serious shortages in funding their day-to-day operational needs and expanding their business capacity. which asked respondents to indicate if they have a bank loan. The responses.12 other individuals when private firms were started (Li.5849 2 Funds for technology improvement 2.up.7 Funds from business partners 17 28.5956 4 Funds for training staff 1. Wang.5344 3 Funds for market expansion 2.3 Funds from external parties 14 23.3 Table II.3 Borrowing from friends and relatives 38 63. 1994). These barriers resulted in the UK government’s attempt to address the apparent failure of the market to supply adequate Number Per cent (%) Owner’s personal savings 44 73. Banks also favour short-term loans. the results might suggest that in recent years. 1998. 3.95 0. The Chinese banking sector is working reasonable well for Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) the private firms and now small businesses are finding it easier to establish loans from banks and other financial institutions compared to the difficulties faced in recent years. financial resources mid point.3 Bank loan 34 56. The problems of a lack of working and development capital among the operators of SMEs also exist in other countries and have attracted the attention of policy makers. Obviously. . However.53 0. which limits the potential of SMEs to undertake long-term strategic planning (Deakins and Hussain. 966 Therefore.5 per cent form funds borrowed from friends.75 0.47 0. MRN credit co-operatives and 13.5084 1 Funds for purchasing new buildings and equipment 4. Extent of shortage of Notes: A 5-point scale was used to collect data. are probably due to the small size of the firms at start. 2004).3 Financial resources at start up Note: Per cent ¼ number/60 Mean SD Rank Working capital 4. the proportion of SMEs using bank loans (56. 2001). extremely short.7 per cent) in our survey at start-up is higher than the figures reported by previous studies. the financial market in China has improved significantly. Additional analysis from another question in the survey. revealed that 61.17 0. not short at all. score: 1.

Considering the findings in Table II.7 28 46. . To test the pecking order theory.0 Table IV.6 40 66.0 Preference of financial resources in growth Note: Sample number (n ¼ 60) period .3 per cent) and borrowing from friends and relatives (63. 1994. accounting documents (including profitability information). 1997. 2000. Jordan et al. . Importance of factors in helping secure bank loans Concerning what factors play important roles for SMEs in obtaining bank loans. They prefer to use internal rather than external finance and to use debt rather than equity. 1998. they are keen on borrowing money from the debt market (80 percent choose this as their first choice) rather than absorbing equity holders (only 1. In fact. the results confirm and support the pecking order hypothesis. Berger and Udell. % No. a question was designed to solicit responses about the financial preference of owner/managers during the growth period of their enterprises. However. In addition..3 per cent). one question was designed to identify those factors. finance for small businesses..7 19 31. in rank order the following five factors emerged as being the most important: . It supports the findings of other studies. % No. % Bank loan 48 80. China Preference of financing in growth period The pecking order hypothesis suggests that the owners of firms have a particular preference order for their choices concerning finance.7 19 31.6 60 100.0 Internal financing 13 21. and .0 12 20. taxation submission. 1998). The results suggest that secured property is the most important factor in securing a bank loan. 1998. Therefore. when businesses expand. credit scoring. especially those in their start-up phase. These results are set out in Table IV. External equity fund 1 1. Among 13 factors.0 0 0 60 100. the high demand for bank loans indicates that small businesses in China have a real need to access the outside debt market to fund rapid development. % No. Cosh and Hughes. national finance policies. Therefore. . Cressay and Olofsson. The results are listed in Table V. secured property. Poutziouris et al.. which suggest that in most First Second Third Total No.7 per cent preferred this option as their first choice). the literature on SMEs 967 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) suggests that owner/managers are reluctant to give up their independence and control (Berggren et al. Previous studies suggest that the independence motive is critical to understanding the observed choices about the capital structure of small businesses.7 60 100. at the start-up phase the owner/managers relied mainly on internal financing and assessed personal savings (73. Business supporting the entrepreneurial activities of SMEs is now one of the UK government’s financing in important strategies as it is in China.

12 Secured property 4. Graham (2004) also reports that the current credit scoring system used by UK British banks consider security for authorising finance. 2005) suggest that Chinese banks tend to allocate funds to firms that have better performance outcomes as identified in a review of a firm’s accounting statements. not important at all.. knows as guanxi. Nevertheless. score: 1.4612 9 Years in business 3.4265 2 National finance policies 4. .4972 5 968 Debt percentage 4.85 0. Bukvic and Bartlett.35 0.77 0. Additional factors identified in other studies (for example.4810 12 Table V. 1999).17 0. I/S. bank’s regulation and working process have improved recently although it more in-depth investigations into the area are necessary.4185 8 Types of ownership 3. The Chinese government is known for its tendency to interfere in its attempt to influence the national economy.83 0.08 0. Pissarides. 2003. This emerges because one fundamental force shaping China’s social values and institutions is the Confucian belief that defines family.2787 11 Types of industry 2. 2005. (2002) predict that the preference for guanxi. 1998. extremely loan important. MRN Mean SD Rank 31. social orders and trust as bracing the cultural architecture.70 0. Relationship with local government’s officers 2.68 0.23 0.4691 4 Credit scoring 4.4691 3 Accounting document provided (e. It is not surprising then that China’s approach to national finance policy plays an important role in guiding how Chinese banks issue loans to SMEs.4997 7 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Relationship with bank’s officers 3.27 0.58 0.3601 1 Taxation submission 4. Hamilton and Fox. 2004). However. 5. Siu (2001) also found that small businesses in China rely heavily on personal contact networks in doing business. mid point transitional economies.3758 10 Profit prospective 3.5031 6 Firm size 4. Chinese society is built on a network of social capital. small entrepreneurs are forced to rely on high-cost short-term finance with high collateral requirements and high-interest charges because of underdeveloped capital markets with a lack of venture capital and long-term credit and information asymmetry for SMEs (for example. trust and loyalty in China will continue to be far more important than organisational affiliations or legal status. which go hand-in-hand with notions of the rule of law (Allen et al. This consists of a huge network of personal relationships that Johannisson (2000) suggests can be used by stakeholders to assess an entrepreneur’s business potential.g. Allen et al.53 0.4459 13 Importance of factors in helping secure a bank Notes: A 5-point scale was used to collect data. Poutziouris et al. the results of this study suggest that China’s legal environment. it is very surprising that relationships with bank or local government officers are marked relatively low in importance to the task of obtaining bank loans. B/S) 4. 3. Cull and Xu..68 0. This stand in contrast to aspects of typical low-context Western cultural beliefs.

5 37. whereas the second column is dependant on the number of respondent in each variable. the first column indicates the percentage within the variable and the second column indicates the percentage with bank loans.7 Construction 87.0 Years in business Qualification of owners 0-3 year 42.0 21.5 30-39 27. China Peirson et al. for manufacturing SMEs.5 Master’s or over 77.5 100. according to Cassar and Holmes (2003).8 13.5 100.4 Wholesale and retail 40. 73. which represents a breakdown by firm 61.4 Hotel and restaurant 62.0 16.1 21. trade-off and bootstrap % within % within Firm % within % within Firm variables variable bank loan variables variable bank loan Types of industry Numbers of employees Manufacture 85.5 State owned 100.0 Others 66.0 73. ownership.0 100.0 Types of ownership Age of owners Individually or family owned 46.1 21.5 54.7 per cent bank loan borrowing rate characteristics . (1995) also suggest that financial leverage should be linked to the observable characteristics of a firm.7 5.4 per cent of total bank loan borrowers.9 100-300 80.1 <30 20.5 Transportation 42.0 13. Some important findings in Table VI are discussed and explained below. Industry.0 8.0 32.0 24.9 8. The results suggest that SMEs operating in construction and manufacturing have relatively high bank loan borrowings while the wholesale and retail sectors have the lowest rate of debt.0 Bank loan borrowing Notes: 37 out of the 60 respondents claimed they have access to bank loans.0 100. In Table IV.3 40.3 40-50 80.7 First degree 83.3 100. Relationship between bank loan borrowing and firm characteristics Business As with much empirical research.0 24. For example.0 Types of trading Business coverage Sole trader 23.0 International 100. trading type.8 18.5 29.8 18.2 Up to high school 36.8 Local 44. 969 life cycle (years in business).9 16.7 45.0 32.7 29.5 10.0 16. size (number of employees).0 100.5 18.0 16.5 >11 year 100.8 Limited liability Co.6 301-500 100. age of owners Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) and their educational qualification.9 Table VI.2 National 87.9 Partnership 100.0 13. These findings can be interpreted by referring to several theories. the bank loan borrowers in the sample were further categorized by the following variables: industry.4 <100 35. 100. It is evident that the first column provides a clearer picture.7 Collectively owned 100. theoretical financing in constructs should be related indirectly to the use of a firm’s characteristics and interpreted with their effects represented by each variable pertaining to that firm. 85.7 32. which indicates the correlation between bank loan borrowing and each variable.6 7-10 year 91. which accounted for 32. including pecking order.9 4-6 year 47.6 67.7 per cent of them had bank loans. The results are displayed in two columns.0 2.1 >500 100.2 100.6 Share holding corporation 100.5 13.1 >50 100.6 Diploma 57. business area.

The empirical evidence from other studies shows that while there is a positive relationship between firm size and bank financing. Secondly. 1996. Van Auken and Neeley (1996) apply the bootstrap theory into SME financing and suggest that small firms in capital-intensive industries (like Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) manufacturing with a high proportion of fixed assets) are less likely to use bootstrap financing compared to firms in less capital-intensive industries (like wholesale and retail with a high proportion of current assets). 1999). Pecking order theory and financial growth models can be used to explain the life cycle of businesses. Michaelas et al. those firms tend to look to outside debt (in particular. Chinese small businesses have strong needs for outside debt.. Their finding highlights both similarities and differences between the two countries. 1999). because asset risk. (2000) concur – it appears that the wholesale and retail trade industries 970 use very little long-term debt. respondents indicated a higher reliance on personal own savings and financial support from banks and other financial institutions. (2006) employ a comparative survey in the UK and in China. According to the trade-off hypothesis. The results from the current study also confirm that in the third stage of the business cycle of SMEs.. Chittenden et al. based on a matched sample of SMEs in the two counties. there but may be a negative relationship between firm size and short- term debts (Cassar and Holmes. whereas the Chinese sample still depended primarily on their immediate family for financial support and to a lesser extent. First. no empirical evidence is provided about the relationship between the life-cycle business and short-term/long-term loans. asset type and requirements for external funds also vary by industry’’. after five years in business. Hussain et al. 1988. short-term and less secured debt) to finance their growth. Fluck et al. a large proportion of respondents indicated they relied heavily on internal funds. This certainly leads to these firms having more leverage (Michaelas et al. They are offered less capital or are offered capital at significantly higher cost than the rate offered to large firms but the transaction costs are most likely a function of scale. Wald. after two years and over the next five years) and found similar financial needs in the first and second stages for firms in the UK and China given that in the initial stage of the business cycle. However. as firms enter a growth period where future sales figures are optimistic. 2003. Unfortunately. in smaller firms.. . For example. Size. Life cycle of business. businesses with mostly tangible assets (like construction and manufacturing) should borrow more because of the collateral provided by their assets (Jordan et al.. After two years in business. the banks. At the start-up stage. However. the UK sample relied primarily on banks/financial institutions and to a lesser extent upon their own savings. 1999). Mayers (1984) suggests that the ‘‘average debt ratio will vary from 31. Agency theory and transaction costs are normally employed to explain why firm size would be related to the capital structure of a firm. the results in the survey fit relatively neatly with current theories and empirical studies in the field. Therefore. Hussain et al. 1998). the survey did not examine the length of bank loans and thus. small equity- controlled firms have to bear higher agency costs in growth periods because they prefer to expropriate wealth from lenders rather than from shareholders in order to maintain independence and control (Jordan et al. MRN arguments. 2000.. which means that smaller scale financing results in relatively higher transaction costs (Titman and Wessels. it is relatively more costly to resolve informational asymmetries with lenders and financiers. 1998. small firms place a greater demand on funds generated internally. Hall et al.12 industry-to-industry. (2006) examined the capital structure in three stages of a firm’s business cycle (start up..

They also confirm that the financial needs and options of Chinese SMEs change with size and stages of the business cycle. Another result derived from a separate question. Cousin. ownership and financing in business area might to some extent link with firm size. Despite improvements. Moreover. national finance policies. implication and limitation In this paper. It was found that the proportion of small businesses using bank loans is higher than suggested by the findings of previous studies.. The results also provide support for the general financing literature related to other countries. This requires that the government as well as the banking sector develop solid strategies that support SMEs . which is different to the findings of other studies. However. officials in the Chinese government must become more cognizant of this problem and move quickly to resolve it. Overall. manufacturing) have relatively high bank loan borrowings while non capital-intensive firms with fewer tangible assets (for example. Regarding the other firm variables in Table VI. A finding of this type has not emerged in previous studies. SMEs mainly raise funds from the owner’s personal savings and the savings of immediate families and friends. Osteryoung et al. Owner/ managers of SMEs have shown a demand for the outside debt market. This might suggest that the environment of the Chinese financial markets has improved since the late 1990s – but further investigation of this conjecture is required. which suggest that the Chinese government’s credit guarantee scheme for SMEs has failed to achieve its initial purpose. 1999. Michaelas et al. 2004). accounting document and credit scoring. wholesale and retail) have relatively low bank debt. This situation is an obstacle to both current development and long-term strategic planning. which asked respondents to 971 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) indicate if the government’s credit guarantee institutions had helped their SME in resolving its financing problems. the findings provide substantial support for the pecking order theory and the financial growth cycle model. The present study also contributes some meaningful evidence to the literature of SME financing in China. In the growth stage. the findings support the position that capital-intensive SME firms with mostly tangible assets (for example. type of trading. this group is more likely to take advantage of bank financing. The results in Table VI suggest that Business there is a strong positive correlation between SME size and bank borrowing. found that 63 per cent of respondents did not agree.. taxation submission. At start-up. 2007. Consequently. Zhang. Chinese SMEs still face serious financial constrains related to operational needs and business expansion. This result confirms the findings from other studies (for example. For example. Conclusion. the relationships with banks and local government’s officers are surprisingly marked very low in importance when owner/ managers obtain a loan. SMEs have strong financial needs and gain access to intermediated finance such as bank loans. the results in this study also suggest that owner/mangers who are in middle age with greater levels of business experiences and attainments in higher education have better knowledge of the financial market – thus. a number of issues surrounding SME financing in China were investigated. The important factors influencing Chinese banks when they issue loans to SMEs include secured property. The results also suggest that China the owner/mangers aged over 40 with more business experiences and who have higher education qualification with better financial market knowledge are more likely to take advantage of bank financing in China. The findings also reinforce the position that policy makers in China must develop appropriate policies to resolve the problems of finance in the SME sector. 1992).

351-82. present and future’’. ‘‘A more complete conceptual framework for SME finance’’.N. ‘‘How to fix China’s banking system’’. A. pp. 12 No. (2004). Berger. Pearson Education Limited. and Silver. M. 24-8 Bukvic.N. S. M. pp. Quarterly Report on small Business Statistics. Allen. Small Business Economics. 8 No. (2003). contribute to expanding the body of knowledge about SME financing in China. G. Chen. C. Vol. J. Vol. Enterprise and Small Business: Principles. (1987). . and Qian. Vol. Vol. (1991). (1990). Vol. pp. Academy of Management Review. Practice and Policy. 1 No. ‘‘Financial barriers to SME growth in Slovenia’’. and Jones-Evans.. Vol. while the limitations of this study include the relatively small sample. (2005). (1995). available at: www. pp. Vol. London. Olofsson. Chittenden. (2006). F. ‘‘Control aversion and the search for external financing in Swedish SMEs’’.F. 1. P. pp. J. and economic growth in China’’.12 to re-examine the current credit guarantee institutional scheme in China.13 No. ‘‘Relationship lending and lines of credit in small firm finance’’. Allen. Journal of Financial Intermediation. (2005).. the level of statistical analysis and an extracted set of survey questions. D. W. 30. and Reed. and Qian. Journal of Small Business and Enterprise Development. Vol. and Wilson. working paper. Cabinet Office. No. ‘‘China’s financial system: past.. Journal of Small Business Finance. 233-42. Journal of Business. ‘‘Development of Chinese small and medium-sized enterprises’’. the results also alert policy makers for the need 31. 15 No. P.V. R. ‘‘The economics of small business finance: The role of private equity and debt markets in the finance growth cycle’’. M. The Enterprise Challenge: Overcoming Barriers to Growth in Small Firms. 2945-66. and Bartlett. J. Qian. ‘‘The single market: finance for small and medium sized enterprises’’. 3. G. C. CBRC. and Udell. 3. (2000). Vol. Vol. and Udell. finance. Beijing. Wharton School. 59-67. ‘‘The pricing of retail deposits: concentration and information’’.. S. L. and Udell. ‘‘Capital structure and financing of SMEs: Australian evidence’’. Berggren. Vol. A.co. 123-47. and Gordon. the research outcomes. Saunders. pp. 8 No. 77. pp. Journal of Financial Economics. pp. Journal of Banking and Finance. A. G. M. 68. G. HMSO. Philadelphia. 3. and Holmes. 972 References Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Advisory Council on Science and Technology (ACOST) (1990). L.F. ‘‘Small firm growth. A. and Hutchinson. University of Pennsylvania. (2003). Carter. In conclusion. J. S. nevertheless. ‘‘Corporate strategy: useful perspective for the study of capital structure?’’.T. 5 No. Berger. 1.. pp. 140-7. pp. 161-81. Ennew..N.F. F. Qian. Vol. Hall. G. 43. pp.bankofengland. London. October. G. (1998).R. C. ‘‘Small business uniqueness and the theory of financial management’’. 335-61. F. Cassar. PA. The International Journal of Bank Marketing. (1991). ‘‘Law. Ang. Huang. Bank of England. 22. Vol. 57-116. (CBRC) (2007). MRN in financing their businesses. G. 2.uk / Barton. Small Business Economics. 6-8. (1996). G. 613-73. Allen. China Banking Regulatory Commission 2007 Annual Report. Binks.1. Moreover.1. and Udell. Accounting and Finance. V. January. access to capital markets and financial structure: review of issues and an empirical investigation’’.. 67-75. McKinsey Quarterly. 1-13. Journal of Banking and Finance. (2000). Berger. pp. Beckier. Economic and Business Review. pp. (2006). Bank of England (2003).

uk/graham (accessed 19 January. Haines.. and Van Auken. China Collins. L. G. (2005). G. pp. R.E. 117-46. Cole. Cambridge. (2005). pp. Vol. ‘‘Institutions. B. (1998). 4. ‘‘An empirical investigation of the growth cycle theory of small firm financing’’. 480-98. pp. ownership. pp. Riding. ‘‘A transactions theory of trade credit use’’.S. D. NY. 2006). 4 No. d’Amboise. Cambridge. in Hughes. H. Gaskill. A. Vol. International Council for Small Business. British Enterprise in Transition: Growth Innovation and Public Policy in the Small and Medium Sizes Enterprise Sector 1994-1999. The Entrepreneur and the Challenge of the 90’s. financial structure and profitability: UK companies in the 973 1980s’’. 3. and Storey. Proceedings of the 34th World Conference of the International Council of Small Business. and Olofsson. working paper. (Eds). (1994). London. A. (1997). Gregory.G. Hutchinson. 179-94. and Michaelas. (1995). A. and Hussain. pp. (2000). in Garnier. and Thomas. Graham.. (1983).hm-treasury. pp. and finance: the determinants of profit reinvestment among Chinese firms’’. pp. 26. The Enterprising Man. 4. J. M. Cull. ‘‘The financing preferences of small firm owners’’. ‘‘Industry effects of the determinants of unquoted SME’s capital structure. and Hughes. Vol. and Fox. Louis. financing in Coleman. New York University. ‘‘Review of the small firms loan guarantee: recommendations’’. S. pp. Vol. the banker and the small business: a comment’’. MA..A. P. Dollinger. (2004). Cressy. A. available at: www. ‘‘Financial information. R. 959-77. M. Irwin.). pp. (1994). and Gasse. Hall. (1989). V. Deakins. M. in Barber. Financing State and Local Economic Development. R. Palgrave Macmillan Studies in Banking and Financial Institutions. ‘‘Introduction’’. Part IV. pp. pp. Vol. Vol. and Rosen. (1964). . (1994). MI. Finance and the Small Firm. 382-92. Cosh. ‘‘Where does the money come from? The financing of small entrepreneurial enterprises’’. 7 No. R. International Journal of Entrepreneurial Behaviour and Research. Routledge. L. Boston. (1993). (2000).A. J. and Benkato. D. Vol. ‘‘A factor analytic study of the perceived causes of small business failure. ‘‘Size. B. J. Holtz-Eakin. St. (1981). ‘‘Small business loan turndowns by Canadian chartered banks: some empirical findings’’. 239-48. ‘‘The importance of relationships to the availability of credit’’. ‘‘An empirical mode of capital structure: some new evidence’’.. Small Business Economics. R.W. D. 94. and Xu.T. Hanson.H. N. Cousin. (2007). Quarterly Journal of Economics.. H. C. Entrepreneurship: Strategies and Resources. and Gardiner. 1-14. D. (1998). A.’’ Journal of Small Business Management. Vol. 3. (Eds). G. T. Ferris.gov. (1988). 77. American Journal of Sociology. 18-32. G. Finance and Accounting. M. 96. 297-312. Rutherford. ESRC Centre for Business Research University of Cambridge.R. Durham. 9. Journal of Business. 323-35. Vol. J. 31 No. Banking in China. East Lansing. 21. ‘‘The financial conditions for Swedish SMEs: survey and research agenda’’. (2000). Oswald. L. Hamilton. 22. and Moore.T. pp. Vol. and Hughes. Michigan State University Press. O. Fluck. Z. O. J. Duke University Press. Journal of Small Business Management.. ‘‘Social capital in the creation of human capital’’. Journal of Business Banking and Finance. Zietz. A. 243-70.S. New York. Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Cosh.. January. 95-120. Homaifar. Journal of Finance Economics. (Ed. Vol. 43 No. Y. British Accounting Review.’’ International Journal of the Economics of Business.

Johannisson. Paris. pp.12 No. MRN Hussain... Mayers. (1958). Vol. in: Sexton. Small Business Economics. Chittenden. Beijing. ‘‘Analyzing initial and growth financing for small businesses’’. pp. A.L. and Rajan. pp. Small Business Economics. 06/01/2006. Bird. 13 31. pp. R. Small Business Economics. ‘‘Capital structure and public firms’’. H. pp. (1997). M. (1990). J. (1999). The Journal of Finance. IMF. B. 974 pp.G. and Meckling. 35-46. Oxford. Vol. Norton. Vol. 1-27. and Landstrom. Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) Jones. Vol. 368-86. MacMillan Committee (1931). 309-18. 3. Matlay. 48. Brown. J. ‘‘Intergenerational succession in small family businesses: borrowing constraints and optimal timing of succession’’. D. Jensen. HMSO. 30 No. and Poutziouris. 61 No. Constand. (2001). and Taylor. 3. (1976). Vol. K. 2005 Annual Development Report of China’s Growing SMEs. (Eds). 6 No. Journal of Small Business Management. 113-30. Journal of Business Venturing. E. ‘‘Financial policy and capital structure choice in UK SMEs: empirical evidence from company panel data’’. R.. 584-99. P. 287-303. (2006). 575-92. J. 4.. D. Journal of Small Business and Enterprise Development. 1-2. (PBOC) (2004). Vol. Millman. 30-8. 06/7. Michaelas. L. pp. A. 39 No.. J. (2000). ‘‘Is lack of funds the main obstacle to growth? EBRD’s experience with small. 4. Paris. Beijing. Management Accounting. Organisation for Economic Cooperation and Development (OECD) (2005). 229-45. Norton. China Renmin University Press. 3-37. Washington. (1992). Vol. 29. 25 Nos. Cmnd. 2 No. (1998). Kimki. Report of the Committee on Finance and Industry. R. Journal of Comparative Economics. F. pp. Private Enterprise Owners in the Transition Society. and Nast. Petersen. Podpiera.L. Journal of Business Finance and Accounting. (1991). C. F. E. 261-97. ‘‘Similarities and differences in small and large corporation beliefs about capital structure policy’’. 519-39. pp. (1994). London. Peirson. Journal of Business Venturing. pp.. R. 2. R. ‘‘Networking and entrepreneurial growth’’. G. W. ‘‘SME financing in the UK and in China: a comparative perspective’’.. corporation finance and the theory of investment’’. Jordan. and Howard. M. 14. and Miller. Park. 305-60. ‘‘Financial ratios in large public and small private firms’’. Vol. pp. Blackwell Publishers. 12 No.A. agency costs and ownership structure’’. 9. Journal of Financial Economics. 49. OECD. American Economic Review. . People’s Bank of China. Li. (2006). S. McGraw-Hill Book Company. ‘‘The capital structure puzzle’’. pp. 6th ed. 3. Vol. 3. pp. (1999). Modigliani. P. and Sehrt. ‘‘Strategy and financial policy in UK small firms’’.and medium-sized businesses in Central and Eastern Europe’’. H. Osteryoung. Business Finance. Vol. The Blackwell Handbook of Entrepreneurship. DC. (1995). ‘‘The cost of capital. internal report (unpublished). P. M. ‘‘Survey on SME financing structure in China’’. Vol. Vol. N. 5. ‘‘Theory of the firm: managerial behaviour. Vol. 608-44.C. (1998). National Development and Reform Committee (NDRC) (2006). (1979). ‘‘The benefits of firm-creditor relationships: evidence from small business data’’. pp.G. China OECD Economic Survey (2005). pp. (1984). Sydney. 3897. M. 13 September. ‘‘Progress in China’s banking sector reform: has banking behavior changed?’’ IMF Working Paper No. Journal of Finance. ‘‘Tests of financial intermediation and banking reform in China’’. Pissarides. Vol...G. R. Lowe.

Journal of Financial Research.ac. (2006). 4. i-xcvi. and Olson. Wucinich. The Journal of Finance. and Chan. Vol. Vol. 383-99. pp. Small Business Economics. UK. (2000). 4. (1988). 2. in Westhead.) graduate from the University of Warwick and a Fund Analyst at Deloitte Touche Tohmatsu LLP. pp.com/reprints . R. R. Edward Elgar. D. July-August.’’ Journal of Entrepreneurial and Small Business Finance. P. 235-49. ‘‘How to finance a small business’’. UK. and Thomas. W. S and Wessels. China Poutziouris. Institute for Small Business Business Affairs.wu@leedsmet. and Michaelas. J. Journal of Small Business and Enterprise Development. 43 No. (1981). 18-33. G. pp. P. ‘‘Chinese entrepreneurship: the development of small family firms in China’’. and White. 5. P.K. ‘‘Introduction’’. (1979). 59. J. 3..’’ Entrepreneurship Theory and Practice.H. P. Zhang. Chittenden. London. Westhead. ‘‘A Small business is not a little big business’’. About the authors Junjie Wu is a senior lecturer of School Accountancy and Financial Services in Leeds Metropolitan University. 18 January. Titman. including books and academic articles. 3. 16-8. Zhang. Advances in Entrepreneurship. Jining Song is a PhD candidate in the Central University of Finance and Economics. 17 No. pp. and Wright. 22 No. Vol. Wald. Van Auken. X. ‘‘The Canadian small business-bank interface: 975 Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) a recursive model’’. Educational Trust. Welsch. Suzhou Education College Paper. Cheltenham. 16 No. (2002). D. Poutziouris. M. (1984). 5-24. J. Y. ‘‘Small firm marketing in China: a comparative study’’. ‘‘The determinants of capital structure choice’’. L. Family Business or Business Families. pp. Liverpool. 1. ‘‘Evidence of bootstrap financing among small start-up firms. Y. Certified Accountants. Tilney Fund Management. She is the author of dozens of publications. pp. A Study of Business Financed under the Small Firms Loan Guarantee Scheme. pp. (Eds). Caijing Magazine. Poutziouris. Haines. Riding. and Chittenden. Robson. HMSO. and Neeley. Entrepreneurship Theory and Practice. (2004). (1996). (1998). Junjie Wu is the corresponding author and can be contacted at:j. P. (1999). Catherine Zeng is BSc (Hons. Vol.. A. M. (1996). (1994). China. To purchase reprints of this article please e-mail: reprints@emeraldinsight. Siu. Vol. London.. (2001). 279-92.com Or visit our web site for further details: www. ‘‘Impact of the WTO on commercial banks and their response’’. 1-19. ‘‘Entrepreneurial start-up and growth: a classification of problems. Vol. Harvard Business Review. 5 No. (2001). 16-9. Micro-Credit in a UK Context.E. 9 No. summer. Leeds.emeraldinsight. 4. F. Terpstra. Vol. J. J. 61 No. 5-15. The Financial Affairs of Private financing in Companies. H. ‘‘The difficult way to marketisation of interest rates’’. (2004). 7 No. 29 November.uk.E. W. S. (1993). 161-87. pp. pp. Vol. Department of Trade and Industry. P. Vol. Wang. and Lean. F. R. Tucker. pp. Wang. pp. N. and Wright. Vol. Management Accounting. ‘‘ABC Bank to restructure by end of ’06’’. China Daily.D. 1. ‘‘How firm characteristics affect capital structure: an international comparison’’.

small and medium enterprises in the manufacturing sector of Fiji and Tonga. Gloria Lan Ge. Revue internationale P. 245-262. The impact of network relationships on internationalization process: An empirical study of Chinese private enterprises. 1169-1189. Scott. Jason Jianxiong Lin. 431-446. International Journal of Emerging Markets 7:3. Purnima Rao. guanxi. Difficulties in Securing Funding from Banks: Success Factors for Small and Medium Enterprises (SMEs). A conceptual framework for identifying financing preferences of SMEs. Zairani. and gender in China. Harrison. 727-749. 2010. [Abstract] [Full Text] [PDF] 8. [CrossRef] 2. [CrossRef] 3. A. Zaimah. A comparative study of the financial problems faced by micro. 137-156. [CrossRef] Downloaded by BAHAUDDIN ZAKARIYA UNIVERSITY IN PAKISTAN At 06:31 01 August 2015 (PT) 4. Gender in Management: An International Journal 25:2. Alexander Newman. Management Research Review 35:8. Nazik Fadil. Hugh Qing Wang. Strategic Change 22:10.1. 2013. 2013.: Économie et gestion de la petite et moyenne entreprise 24. Cindy Millman.v55.1002/jsc. Satish Kumar. This article has been cited by: 1.7/8.12720/joams. Hussain. Javed G. Z. Ziliang Deng. finance. 99-112. 2015. [Abstract] [Full Text] [PDF] 7. 2012. [CrossRef] 9. Asia Pacific Journal of Management 30. [CrossRef] 5.v22. Richard T.5. Jonathan M. Josée St-Pierre. 354-357. Credit risk assessment and the impact of the New Basel Capital Accord on small and medium‐sized enterprises. Journal of Advanced Management Science :10. Z. 2013. Thunderbird International Business Review 55:10.4. La recherche en finance entrepreneuriale. 2013. Suwastika Naidu.E. Ana Paula Matias Gama. Anand Chand. [Abstract] [Full Text] [PDF] . [CrossRef] 6. 2012. Financing of Micro and Small Enterprises in China: An Exploratory Study. Sow Hup Chan. 255. 531-544. 2011. “Enter the dragoness”: firm growth. How Do SMEs with Single and Multiple Owners Finance Their Operations Differently? Empirical Evidence from China.M.1002/tie. Helena Susana Amaral Geraldes. Daniel Borgia. Small Enterprise Research 22.