Abstract
Small and medium enterprises (SMEs) play an important role in China’s impressive economic growth and make substantial contribution to employment and outputs in last decades. Nevertheless, a lot of bottlenecks and obstacles appear for further growth of SMEs, especially with respect to financing. SME financing is different from that of larger corporations, since they are younger and subject to more growth uncertainty than large firms, especially in developing countries. The main problems related to SME access to finance in China are the risk involved in performing bad loans is higher. So it is significant for managers and investors both in theoretical and practical fields to assess the financing risk of SMEs. This paper’s aim is to propose an analytical framework of risk evaluation on SME financing based on grey theory. Firstly, this paper discusses the current SME financing in China. Secondly, it sets up a multi-hierarchy index system. Thirdly, it confirms the weight of every index with AHP and gave a general assessment by means of a grey clustering method. Finally, a case study is conducted to validate the evaluation model and the evaluation process.
Highlights
The availability of financing for SMEs have the subject of growing attention in recent years based on the role SMEs play in economics growth
The application of the multilevel grey evaluation to the field of financing risk on small and medium enterprises is an advance with respect to previous studies on the application of multi-criteria methods
Financing risk on small and medium enterprises is mainly credit risk, which is the risk of loss due to a debtor's non-payment of a loan or other line of credit
Summary
The availability of financing for SMEs have the subject of growing attention in recent years based on the role SMEs play in economics growth. Due to their private-ownership nature, entrepreneurial spirit, and the ability to adapt to the ever-changing environment, they contribute to sustainable growth and employment generation in a significant manner (Aung Kyaw, 2008). The evaluation of financing risk on small and medium enterprises is significant because the process can help us find the latent problem and reduce the risk. The application of the multilevel grey evaluation to the field of financing risk on small and medium enterprises is an advance with respect to previous studies on the application of multi-criteria methods
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