Abstract: Through constructing a game model between leaders and followers, this paper explains the competitive relationship between state-owned enterprises and private enterprises in the financial market. The conclusion of the theoretical research indicates that the financing costs of the state-owned enterprises mainly depend on the marginal effect brought by the financing on its performance growth; while the financing costs of the private enterprises depend on the marginal effect of financing for its performance growth on the one hand, and on the other hand depend on whether the financing of state-owned enterprises will squeeze the financing space of private enterprises and form the reverse competition against the state-owned enterprises. The empirical result based on the domestic bond market data shows that the financing costs of private enterprises are significantly higher than that of state-owned enterprises. When both state-owned enterprises and private enterprises obtain financing at the same time, the larger the financing scale of state-owned enterprises, the greater the financing costs of private enterprises will be, that is, a squeeze effect on private enterprises is formed. The increase in financing costs of private enterprises will in turn increase the financing costs of state-owned enterprises and form reverse competition. Private enterprises can effectively reduce their financing costs by such methods as reducing information asymmetry through public offering financing, increasing financing scale and so on. Therefore, in order to solve the financing problem of private enterprises, it is necessary to carry out policy adjustment from such aspects as increasing the financial transparency of private enterprises, improving the service quality of government regulatory agencies, optimizing the performance assessment methods of financial institutions, and so on.

Key words: game model, financing, squeeze effect, reverse competition, private enterprise