Abstract:

A model is used to explain reason of asymmetric information and analyze influence on Small &Medium Enterprises (SME) financing from scope of credit activities, deterrent of information disclosure and output of per capital in the kind of asymmetric information. This paper find: (1)Information cannot be shared in competitive trade, even if profit is not hampered by the publishing, which have deterrent effect on default weakened by adverseselection in long term. (2)The influence is different between big-scale society and small-scale society, which has benefit effect on the deterrent and restricts default. (3)Guarantee will still exist for other risk without the asymmetric information. With market economy expanding, the transition from the small-scale society to the big-scale society let SME financing difficulty weigh heavily. Therefore the proposal is to eliminate the asymmetric information and enhance SME profitability.

Key words: Information constrain, Asymmetric information, SME financing, Guarantee, Comparative profits