SME Board Research Articles

How does digital finance affect financing constraints of SMEs? Evidence from China

ABSTRACT Based on the panel data of A-share listed companies on China’s SME Board and the Science and Technology Innovation Board from the year 2011 to 2021, this article empirically examines the direct effect, internal mechanism and heterogeneous effects of digital finance on financing constraints of SMEs by using a two-way fixed-effects model. Results show that digital finance can significantly alleviate the financing constraints of SMEs through enhancing TFP, improving internal control and mitigating agency problem. Moreover, in areas with limited traditional financial resources, weak oversight, and high-tech industries, digital finance more effectively eases financing challenges. As financial development increasingly relies on digital technology, these findings can guide policy implications to resolve SME financing difficulties in the digital economy.

Quantitative Stock Selection Model Using Graph Learning and a Spatial–Temporal Encoder

In the rapidly evolving domain of finance, quantitative stock selection strategies have gained prominence, driven by the pursuit of maximizing returns while mitigating risks through sophisticated data analysis and algorithmic models. Yet, prevailing models frequently neglect the fluid dynamics of asset relationships and market shifts, a gap that undermines their predictive and risk management efficacy. This oversight renders them vulnerable to market volatility, adversely affecting investment decision quality and return consistency. Addressing this critical gap, our study proposes the Graph Learning Spatial–Temporal Encoder Network (GL-STN), a pioneering model that seamlessly integrates graph theory and spatial–temporal encoding to navigate the intricacies and variabilities of financial markets. By harnessing the inherent structural knowledge of stock markets, the GL-STN model adeptly captures the nonlinear interactions and temporal shifts among assets. Our innovative approach amalgamates graph convolutional layers, attention mechanisms, and long short-term memory (LSTM) networks, offering a comprehensive analysis of spatial–temporal data features. This integration not only deciphers complex stock market interdependencies but also accentuates crucial market insights, enabling the model to forecast market trends with heightened precision. Rigorous evaluations across diverse market boards—Main Board, SME Board, STAR Market, and ChiNext—underscore the GL-STN model’s exceptional ability to withstand market turbulence and enhance profitability, affirming its substantial utility in quantitative stock selection.

The Impact of Digital Inclusive Finance on Corporate Leverage Ratio—Evidence from Listed Companies in the SME Board of China

The Impact of Digital Inclusive Finance on Corporate Leverage Ratio—Evidence from Listed Companies in the SME Board of China

Digital transformation and financing constraints of SMEs: evidence from China

ABSTRACT It is known that digital transformation can sharpen the competitive edge of SMEs, yet the relationship between digital transformation and the financing of SMEs only receives little attention. Based on the data of Chinese companies listed on SME board from 2010 to 2020, this paper empirically examines the impact of digital transformation on the financing constraints of SMEs as well as its mechanism. The study finds that digital transformation significantly eases the financing constraints of SMEs, and the conclusion remains valid after considering endogeneity issues and conducting robustness tests. The mechanism analysis manifests that SMEs improve the quality of external information disclosure through digital transformation, thereby alleviating financing constraints. In addition, the impact of digital transformation on the financing constraints of SMEs demonstrates prominent heterogeneity. The mitigation effect of digital transformation is more pronounced in areas where digital financial is well developed, in state-owned enterprises, high-tech enterprises and long-term oriented enterprises. In the context of SMEs, this paper reveals the relationship between digital transformation and corporate financing, enriching the studies on the organizational performance effects of digital transformation.

The impact of carbon neutrality policies on the stock market from a supply chain perspective

PurposeThis study explores the impact of carbon neutrality policies on Chinese stock market from a supply chain perspective. Specifically, the carbon policy refers to the Action Plan for Carbon Dioxide Peaking Before 2030 (the Plan) in China.Design/methodology/approachThis paper is based on the resource dependence theory (RDT) and applies the event study methodology to explore the impact. It uses the cross-sectional regression model to reveal the moderating effect of supply chain characteristics on the stock market reaction with a data set of 354 listed companies in A-shares (excluding ChiNext and SME board).FindingsThe promulgation of the Plan shows a significant negative stock market reaction. Customer concentration, out-degree centrality and smart supply chains (SSCs) have a significant negative moderating effect. In-degree centrality and supplier concentration have a significant positive moderating effect. Furthermore, the conclusions concerning out-degree centrality, supplier concentration and SSCs are counterintuitive.Practical implicationsFor policymakers, the study results provide a reference for evaluating the carbon neutrality policy. For managers, this study provides theoretical support for strategically adjusting and designing supply chain structures in the context of advocating peak carbon dioxide emissions and carbon neutrality.Originality/valueThis paper is the first attempt that includes the supply chain structure factors into the impact of carbon neutrality policies on the stock market.

Performance relative to aspiration and SMEs' internationalization speed: the moderating effects of policy knowledge and institutional distance

PurposeThis study seeks to explore the relationship between performance relative to aspiration and SMEs' internationalization speed, and moderating effects of top management's policy knowledge and institutional distance between the above relation.Design/methodology/approachThis study tests the authors’ hypotheses using data on Chinese manufacturing SMEs over a 5-year period from 2013 to 2017. The authors leverage archival panel data on publicly listed companies on the SME Board, GEM and New OTC Market in the Shanghai and Shenzhen Stock Exchanges. The authors then collected data from the WIND and ZEPHYR databases.FindingsThe results confirm a U-shaped relation between performance relative to aspiration and SMEs' internationalization speed, and show that this relation is steepening by top management's policy knowledge in home country but flattening by institutional distance as environmental dynamics.Originality/valueThe study findings contribute to the international business field by exploring how a firm's risk situation in internationalization can change, thereby influencing SMEs' international expansion.

Research on the Positioning and Development of China's ChiNext Market

The establishment of the Growth Enterprise Market is of great significance for the construction of China's multi-level capital market. Since the launch of the ChiNext in October 2009, the number of companies listed for trading has increased from 28 to 134 now. The Chinese ChiNext market is in its infancy, and the rapid development of the ChiNext inevitably exposes various problems during its development process. Through research on the current situation and stages, analyze the characteristics and risks faced by the ChiNext market, and understand the current situation of the coexistence of the ChiNext and SME boards in China's capital market. Drawing on the research on listing resources, listing scale and issuance standards, market operation mechanisms, market supervision and other issues in the development process of overseas ChiNext boards, and explore various solutions.

Spillover Effects of the Sci-Tech Innovation Board Registration System on the Quality of Information Disclosure

ABSTRACT This study investigates whether the Sci-Tech Innovation Board registration system has spillover effects on companies listed on other boards. The results show that the registration system significantly improves the quality of accounting information disclosure by the companies on the Main and SME Boards that remain under the approval system. The spillover effects are more significant for companies that are non-state-owned, audited by non-Big 4 firms, or in the same industries as the companies on the Sci-Tech Innovation Board compared with other companies. The findings provide evidence to improve the subsequent registration system reforms and the level of information disclosure quality.

The Influence of Digital Inclusive Finance on Business Performances —— Based on Small and Median-sized Enterprises in the Chinese Stock Market

In recent years, digital inclusive finance is growing rapidly in China. Based on the 5030 samples from the SME board and ChiNext board from 2011 to 2020, this paper discovered the incremental effect of digital inclusive finance on firm performance through panel data regression models. By using the digital inclusive finance development index to represent the level of digital inclusive finance and using return on equity to measure the business performances, this paper successfully figures out the quantitative relationship between these two variables. The digital financial inclusion, coverage breadth, and depth of usage all enhance the business performances of those companies. For SMEs in the eastern region, non-manufacturing industries, or with strong internal control capabilities, the development of digital inclusive finance will lead to the improvement of the business performance as well. The results not only enrich the relevant literature on the economic effect of digital inclusive finance but also provide empirical evidence for government and enterprises to stimulate economic growth.

Financing Efficiency Calculation of Energy Enterprises Based on Internet of Things

In order to conduct a special study on the financing efficiency of a certain industry, the authors propose a method for calculating the financing efficiency of energy enterprises based on the Internet of Things. Combining the DEA method with the Bootstrap method, taking the IoT data of 30 SME boards and 30 energy companies listed on the ChiNext listed in 2010 as a research sample, and using R language and Deap2.1 software, the financing efficiency from 2011 to 2015 is calculated. Experimental results show that from 2011 to 2015, only 28.3% of the enterprises reached the effective state of technical efficiency on average, and the financing efficiency of energy enterprises was generally inefficient. The pure technical efficiency value of the whole enterprise decreases year by year, and its technical efficiency value lower than its scale efficiency is the main reason that its technical efficiency is generally not high.

The Relationship between Corporate Sustainable Development Performance, Investor Sentiment, and Managerial Overconfidence

In the post-pandemic era, companies are facing challenges in their business development and may pay fewer attention to their sustainable development performance, whereas the investors are looking for better corporate sustainable development. Using a sample of Chinese listed companies during 2010–2018, this paper empirically examines the relation between corporate sustainable development performance, investor sentiment, and managerial overconfidence with econometric tools such as panel data regression and S-GMM estimation. Three kinds of corporate sustainable development activities as measured by Corporate Social Responsibility (CSR) indexes, including consumer rights, employee benefits, and environmental protection, are proved to have a positive impact on investor sentiment. Compared to the SME and GEM Board, investor sentiment in the Main Board is less affected by corporate sustainable development. Furthermore, investor’s high sentiment leads to high managerial confidence in the SME and GEM Board, and managerial overconfidence is self-correcting over time. This paper illustrates why maintaining good corporate sustainable development performance is beneficial for listed companies from a new perspective.

Research on the impact of digital finance on the innovation performance of enterprises

PurposeThe purposes of this paper are to analyze whether digital finance can contribute to enterprises' innovation performance and to determine the mediating effect of government subsidies.Design/methodology/approachThis paper empirically examines the impacts of digital finance on enterprises' innovation performance by looking at Chinese companies listed on the SME and GEM boards from 2011 to 2018 to build an econometric model to test our hypotheses. The mediating effect of government subsidies, the moderating effect of financial constraints are examined, as well as shareholding of the largest shareholders in each selected company and the asset-liability ratio.FindingsThe results show that digital finance has a significant promotional effect on firms' innovation performance and that government subsidies play a partial mediating role in digital finance's contribution to firms' innovation performance. In addition, financial constraints and the shareholding of the largest shareholders in each selected company have a negative moderating effect on the relationship between government subsidies and firms' innovation performance. On the contrary, the asset-liability ratio is found to positively affect the relationship.Originality/valueThere has been limited research to date on the relationship between digital finance and firms' innovation performance, particularly with regard to the extent to which digital finance can influence innovation performance and the mechanisms for doing so. Therefore, it is of great significance to examine the relationship between digital finance and enterprises' innovation performance, which can also provide guidance for both the Chinese government and enterprises.

Green entrepreneurship and SME performance: the moderating effect of firm age

Green entrepreneurship has been increasing with growing attention to environment protection by a variety of stakeholders. Green innovation, as the essence of green entrepreneurship, has attracted a broad range of scholarly attention with yet inconclusive findings regarding its effect on firm performance. According to our analyses of 1667 firms listed on SME board and GEM in China during the period from 2010 to 2019, we find interesting results regarding the type of green innovation involved and the moderating effect of firm age on the link between green innovation and SME performance. More precisely, we find green utility-model innovation positively influences firm performance for SMEs, whereas green invention innovation does not contribute to firm performance overall. More interesting, our empirical results suggest that older firms benefit more from both green invention innovation and green utility-model innovation than younger firms. This research contributes to the literature on green entrepreneurship as well as green innovation.

Patent predictive price-to-book ratio (PB) on improving investment performance -- Evidence in China

Patent is strongly meaningful for most countries’ technology development and economy growth. China is the world largest patent application country and has the world No.2 stock market. In this research, China listed companies (A-shares) in Shanghai main board, Shenzhen main board, GE board, and SME board from 2016 to 2018 were applied to discuss the prediction ability of patent indicators to financial performance. The patent prediction equations for quantitatively predicting the price-to-book ratio (PB) by patent indicators were constructed via Granger Causality test and time series regression. The stock selection criteria based on the patent predictive PB were further discussed. The traditional value investors consider stocks with PB values under 3.0 are undervalued. It was found that most stock portfolios selected by either the lower predictive PB or the higher predictive PB growth rate had higher performance above the traditional PB investment strategy. The criteria also worked well on GE board and SME board even though these stock boards were seriously impacted to decline by the China-US trade conflict. Though the overall economic environment fluctuated, the patent prediction algorithm proposed was proved to be useful to discover good stock portfolios and improve traditional PB investment strategy

A Study on the Impact of Fiscal and Tax Policy on R&D Innovation in SMEs: Evidence from China

Purpose The purpose of this paper is to analyze the impact of fiscal and tax policies and financing constraints on R&D investments of small and medium-sized enterprises;and provide useful references for the government and financial institutions to formulate relevant policies. Design/Methodology/Approach This paper takes the non-financial enterprises listed on the SME Board of Shenzhen Stock Exchange from 2010 to 2018 as the research object;establishes a series of variables according to the research content;and establishes a multiple linear regression model;and then it makes correlation analysis and regression analysis on the data with SPSS software. At last;it tests the robustness of the model. Findings Through this study;we find that fiscal and tax support policies have a positive effect on SME R&D innovations;financing constraints are significantly negatively correlated with SME R&D innovations;and financing constraints will significantly inhibit the positive effect of fiscal and tax support on SME R&D innovations. Research Implications This paper deeply analyzes the influence of objective factors on the R&D investment of enterprises from the three aspects of government (policy);financial institutions (capital) and enterprises;the results can provide more targeted references for the formulation of policies.

IPO underpricing and long-term performance in China: the perspective of price limit policy

PurposeThe purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.Design/methodology/approachThe data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.FindingsThe first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.Practical implicationsGood policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.Originality/valueThis paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

The Influence of Financial Development on Financing Constraint of Listed Companies on SME Board

Based on the sample data of listed companies on China's SME Board, this paper empirically tests whether there is financing constraint on listed companies on China's SME Board by using the financing constraint model proposed by Almeida et al. (2004), and further analyzes the impact of financial development on listed companies' financing constraint.The empirical results show that listed companies in China are facing different degrees of financing constraints, and the progress of financial development level can alleviate the financing constraints of listed companies. Finally, relevant policy suggestions are put forward accordingly.

From venture capital towards venture firm innovation performance: evidence from SMEs of China

Based on information asymmetry, agency theory and resource-based view (RBV), this study investigates the impact of venture capital (VC) on venture firm innovation performance, ascertains the extent to which VC affects venture firm innovation performance and finds the mediating effect of management incentives. Constructing a sample of a novel panel dataset of firms listed on the SME Board of China, we examined a sample of 927 start-ups between 2008 and 2017, showing a notable negative relationship between VC and Patent, and a positive relationship between VC and total factor productivity (TFP), providing stable evidence that VC could not spur firm patent directly, but facilitate the commercialization of innovation. Moreover, it shows that management equity incentives (MEI) and management cash incentives (MCI) playing significant positive mediating role between VC and TFP, while there is no mediating effect between VC and Patent. Findings of this study strengthen the experience of VC and suggest how practitioners of SMEs to enhance the commercialization of innovation, considerably extends our understanding of the impact of VC on venture firm innovation performance.

Legal Infrastructure and High-Quality Development of Capital Market: An Event Study Based on the New Securities Law

On December 28, 2019, the newly amended “Securities Law of the People’s Republic of China” was reviewed and approved. As the fundamental law of the capital market, the new Securities Law provides institutional guarantee for optimizing and perfecting the basic system of the capital market and promoting the high-quality development of the listed companies. So, how do investors in the capital market understand the new Securities Law? How will the market react to the new Securities Law? Do investors react differently towards the different types of companies? The answer to these questions determines the basic question of the effect of the formulation and implementation of the new Securities Law. This paper intends to conduct a systematic study of this.This study takes the approval of the new Securities Law as a research event to examine the impact of the improvement of the legal infrastructure.The results find that the stock market makes significant positive response upon the approval of the new Securities Law. According to the characteristics of the companies concerned in the new Securities Law, it is found that the companies with higher risk of violation of laws and regulations have poor market reaction, while those with better information environment and higher level of investor protection have more positive market reaction. Further analysis shows that the new Securities Law guides market funds to listed companies on the main board rather than GEM and SME board. A comparative analysis with the official implementation day finds that the market response brought by the introduction of the law is mainly released on the day of approval.The potential contributions of this study are as follows: First, this study contributes to the literature about security laws and market reaction, and provides evidence of Chinese capital market, which lacks private enforcement. Second, this study shows Chinese evidence about amending security laws, and contributes to the literature of “Law and Finance”. Chinese capital market started late but has developed fast, so it is important to learn about the role of security laws. Third, the conclusion has strong policy and practical implications. This paper provides important enlightenment for the implementation of the new Securities Law and the improvement of other legal infrastructures of the capital market. Also, it provides empirical evidence for how to realize the deepening of the securities market reform and ensure the high-quality development of the capital market.

Assessment of a cost-model on sustainability for a proposal for a framework for the evaluation of sustainable manufacturing

A process-oriented, performance-based cost-model for manufactured parts has been assessed in its ability to capture sustainability. Literature has been reviewed and found 108 sustainability indicators, which have been compared with the input parameters in the cost-model. Based on a gap analysis, a framework for sustainable production evaluation has been developed. The framework considers performance-based production costs of a product, along with overhead costs, and selling price, giving the product surplus. Additionally, there is a spider-web chart of sustainable factors presenting current state and target values of the product's sustainability. The framework has mainly been developed for SME's boards, but also for production managers in larger firms. Hopefully, this framework will help companies assess their sustainability, with respect to economy, the environment and social responsibility, contributing to a small part of the efforts needed to provide a more sustainable world for the future. [Submitted 27 February 2018; Accepted 18 March 2019]