Determinants of financing pattern and access to formal - informal credit: The case of small and medium sized enterprises in Vietnam
Main Article Content
Abstract
We investigate factors from firm side that determine their financing pattern for new investment
projects and their decision to choose formal, informal credit, or both. For financing pattern of new
investment project, we use Random-effect model while Unordered-Multinomial Logistic is used to
estimate probability of choosing any of four choices to access to finance, say, formal credit, informal
credit, both of them, or none of them. Our analysis is based on a panel of around 2200 small and
medium sized enterprises with 7900 observations extracted from the “Survey of small and medium
scale manufacturing enterprises in Vietnam” in 2005, 2007, and 2009.
Article Details
Keywords
Small and medium sized enterprises, formal credit, informal credit
References
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7. Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance,25(6), 932-952.
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11. Bougheas, S., Mizen, P., & Yalcin, C. (2006). Access to external finance: Theory and evidence on the impact of monetary policy and firm-specific characteristics. Journal of Banking & Finance,30(1), 199-227.
12. Coleman, S. (2002). Small firm use of debt: An examination of the smallest firms. Journal of Entrepreneurial Finance 7(1), 51-76.
13. Coleman, S. (2004). The role of education and experience in small firm access to bank loans: Is there a link. Journal of Business and Entrepreneurship,16(1), 1-16.
14. Devereux, M., & Schiantarelli, F. (1990). Investment, financial factors, and cash flow: evidence from UK panel data. In Asymmetric information, corporate finance, and investment (pp. 279-306): University of Chicago Press, 1990.
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17. Fatoki, O., & Odeyemi, A. (2010). Which New Small and Medium Enterprises in South Africa Have Access to Bank Credit? International Journal of Business and Management,5(10), P128.
18. Fjose, S., Grünfeld, L. A., & Green, C. (2010). SMEs and growth in Sub-Saharan Africa: MENON Business Economics.
19. Gertler, M. (1988). Financial structure and aggregate economic activity: an overview: National Bureau of Economic Research Cambridge, Mass., USA
20. Gine, X. (2011). Access to capital in rural Thailand: an estimated model of formal vs. informal credit.
Journal of Development Economics,96(1), 16-29.
21. Harrison, A. E., Love, I., & McMillan, M. S. (2004). Global capital flows and financing constraints. Journal of Development Economics,75(1), 269-301.
22. Johnson, C. A. (2004). Choosing people: the role of social capital in information seeking behaviour. Information Research,10(1), 10-11.
23. Kasseeah, H., & Thoplan, R. (2012). Access to Financing in a Small Island Economy: Evidence From Mauritius. Journal of African Business,13(3), 221-231.
24. Laeven, L. (2003). Does financial liberalization reduce financing constraints? Financial Management, 5-34.
25. Le. (2012). What Determines the Access to Credit by SMEs? A Case Study in Vietnam. Journal of management research,4(4).
26. Le, & Nguyen, T. V. (2009). The Impact of Networking on Bank Financing: The Case of Small and Medium‐Sized Enterprises in Vietnam. Entrepreneurship Theory and Practice,33(4), 867-887.
27. Le, Venkatesh, S., & Nguyen, T. V. (2006). Getting bank financing: A study of Vietnamese private firms. Asia Pacific Journal of Management,23(2), 209-227.
28. Levine, R. (2005). Finance and growth: Theory and evidence. Handbook of economic growth,1, 865934.
29. Malesky, E. J., & Taussig, M. (2009). Where Is Credit Due? Legal Institutions, Connections, and the Efficiency of Bank Lending in Vietnam. Journal of Law, Economics, and Organization,25(2), 535-578.
30. Myers, S. C. (1984). Capital structure puzzle: National Bureau of Economic Research Cambridge, Mass., USA
31. Nakano, M., & Nguyen, P. (2011). Do older boards affect firm performance? An empirical analysis based on Japanese firms. An Empirical Analysis Based on Japanese Firms (July 6, 2011).
32. OECD. (1998). Small businesses, job creation and growth: Facts, obstacles and best practices. Retrieved from http://www.oecd.org/industry/smesandentrepreneurship/2090740.pdf
33. Oliner, S. D., & Rudebusch, G. D. (1992). Sources of the financing hierarchy for business investment. The review of Economics and Statistics, 643-654.
34. Petersen, M. A., & Rajan, R. G. (2002). Does distance still matter? The information revolution in small business lending. The Journal of Finance,57(6), 2533-2570.
35. Rand, J. (2007). Credit constraints and determinants of the cost of capital in Vietnamese manufacturing. Small Business Economics,29(1), 1-13.
36. Runckel, C., W. (2011). Small and Medium Enterprises (SME) in Vietnam. [Report]. Business in Asia.
37. Safavian, M., & Wimpey, J. (2007). When Do Enterprises Prefer Informal Credit? World Bank Policy Research Working Paper Series, Vol.
38. Shane, S., & Cable, D. (2002). Network ties, reputation, and the financing of new ventures. Management Science,48(3), 364-381.
39. Straub, S. (2005). Informal sector: the credit market channel. Journal of Development Economics,78(2), 299-321.
40. Thanh, V., Cuong, T. T., Dung, B., & Chieu, T. D. U. C. (2011). Small and Medium Enterprises Access to Finance in Vietnam. Jakarta: Economic Research Institute for ASEAN and East Asia (ERIA).
41. Tsai, K. S. (2004). Imperfect substitutes: The local political economy of informal finance and microfinance in rural China and India. World Development,32(9), 1487-1507.
42. Uchida, H. (2011). What Do Banks Evaluate When They Screen Borrowers? Soft Information, Hard Information and Collateral. Journal of Financial Services Research,40(1-2), 29-48.
43. Yaldiz, E., Altunbas, Yener and Bazzana, Flavio. (2011). Determinants of Informal Credit Use: A Cross Country Study. Midwest Finance Association 2012 Annual Meetings Paper.
2. Allee, K. D., & Yohn, T. L. (2009). The demand for financial statements in an unregulated environment: An examination of the production and use of financial statements by privately held small businesses. The Accounting Review,84(1), 1-25.
3. Bates, T. (1990). Entrepreneur human capital inputs and small business longevity. The review of Economics and Statistics, 551-559.
4. Baydas, M. M., Bahloul, Z., & Adams, D. W. (1995). Informal finance in Egypt:“banks” within banks. World Development,23(4), 651-661.
5. Beck, T. (2007). Financing constraints of SMEs in developing countries: Evidence, determinants and solutions. The World Bank. Washington DC.
6. Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance,30(11), 2931-2943.
7. Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance,25(6), 932-952.
8. Beck, T., Demirguc-Kunt, A., & Levine, R. (2004). Law and firms’ access to finance: National Bureau of Economic Research.
9. Bernanke, B., Gertler, M., & Gilchrist, S. (1994). The financial accelerator and the flight to quality: National Bureau of Economic Research.
10. Black, S. F., Amy;Guttman,Rochelle. (2012). The financial characteristics of small business. Small business finance roundtable, 25-32.
11. Bougheas, S., Mizen, P., & Yalcin, C. (2006). Access to external finance: Theory and evidence on the impact of monetary policy and firm-specific characteristics. Journal of Banking & Finance,30(1), 199-227.
12. Coleman, S. (2002). Small firm use of debt: An examination of the smallest firms. Journal of Entrepreneurial Finance 7(1), 51-76.
13. Coleman, S. (2004). The role of education and experience in small firm access to bank loans: Is there a link. Journal of Business and Entrepreneurship,16(1), 1-16.
14. Devereux, M., & Schiantarelli, F. (1990). Investment, financial factors, and cash flow: evidence from UK panel data. In Asymmetric information, corporate finance, and investment (pp. 279-306): University of Chicago Press, 1990.
15. EC. (2005). The new SMEs definition: Userguide and model declaration: European Commission. Retrieved from http://ec.europa.eu/enterprise/policies/sme/files/sme_definition/sme_user_ guide_en.pdf
16. EC. (2011). Seventh progress report on SMEs participation in the 7th R&D Framework program. Brussels: European Commission. Retrieved from http://ec.europa.eu/research/sme-techweb/pdf/ smes-in-fp7-spring-2011_full-rep_en.pdf
17. Fatoki, O., & Odeyemi, A. (2010). Which New Small and Medium Enterprises in South Africa Have Access to Bank Credit? International Journal of Business and Management,5(10), P128.
18. Fjose, S., Grünfeld, L. A., & Green, C. (2010). SMEs and growth in Sub-Saharan Africa: MENON Business Economics.
19. Gertler, M. (1988). Financial structure and aggregate economic activity: an overview: National Bureau of Economic Research Cambridge, Mass., USA
20. Gine, X. (2011). Access to capital in rural Thailand: an estimated model of formal vs. informal credit.
Journal of Development Economics,96(1), 16-29.
21. Harrison, A. E., Love, I., & McMillan, M. S. (2004). Global capital flows and financing constraints. Journal of Development Economics,75(1), 269-301.
22. Johnson, C. A. (2004). Choosing people: the role of social capital in information seeking behaviour. Information Research,10(1), 10-11.
23. Kasseeah, H., & Thoplan, R. (2012). Access to Financing in a Small Island Economy: Evidence From Mauritius. Journal of African Business,13(3), 221-231.
24. Laeven, L. (2003). Does financial liberalization reduce financing constraints? Financial Management, 5-34.
25. Le. (2012). What Determines the Access to Credit by SMEs? A Case Study in Vietnam. Journal of management research,4(4).
26. Le, & Nguyen, T. V. (2009). The Impact of Networking on Bank Financing: The Case of Small and Medium‐Sized Enterprises in Vietnam. Entrepreneurship Theory and Practice,33(4), 867-887.
27. Le, Venkatesh, S., & Nguyen, T. V. (2006). Getting bank financing: A study of Vietnamese private firms. Asia Pacific Journal of Management,23(2), 209-227.
28. Levine, R. (2005). Finance and growth: Theory and evidence. Handbook of economic growth,1, 865934.
29. Malesky, E. J., & Taussig, M. (2009). Where Is Credit Due? Legal Institutions, Connections, and the Efficiency of Bank Lending in Vietnam. Journal of Law, Economics, and Organization,25(2), 535-578.
30. Myers, S. C. (1984). Capital structure puzzle: National Bureau of Economic Research Cambridge, Mass., USA
31. Nakano, M., & Nguyen, P. (2011). Do older boards affect firm performance? An empirical analysis based on Japanese firms. An Empirical Analysis Based on Japanese Firms (July 6, 2011).
32. OECD. (1998). Small businesses, job creation and growth: Facts, obstacles and best practices. Retrieved from http://www.oecd.org/industry/smesandentrepreneurship/2090740.pdf
33. Oliner, S. D., & Rudebusch, G. D. (1992). Sources of the financing hierarchy for business investment. The review of Economics and Statistics, 643-654.
34. Petersen, M. A., & Rajan, R. G. (2002). Does distance still matter? The information revolution in small business lending. The Journal of Finance,57(6), 2533-2570.
35. Rand, J. (2007). Credit constraints and determinants of the cost of capital in Vietnamese manufacturing. Small Business Economics,29(1), 1-13.
36. Runckel, C., W. (2011). Small and Medium Enterprises (SME) in Vietnam. [Report]. Business in Asia.
37. Safavian, M., & Wimpey, J. (2007). When Do Enterprises Prefer Informal Credit? World Bank Policy Research Working Paper Series, Vol.
38. Shane, S., & Cable, D. (2002). Network ties, reputation, and the financing of new ventures. Management Science,48(3), 364-381.
39. Straub, S. (2005). Informal sector: the credit market channel. Journal of Development Economics,78(2), 299-321.
40. Thanh, V., Cuong, T. T., Dung, B., & Chieu, T. D. U. C. (2011). Small and Medium Enterprises Access to Finance in Vietnam. Jakarta: Economic Research Institute for ASEAN and East Asia (ERIA).
41. Tsai, K. S. (2004). Imperfect substitutes: The local political economy of informal finance and microfinance in rural China and India. World Development,32(9), 1487-1507.
42. Uchida, H. (2011). What Do Banks Evaluate When They Screen Borrowers? Soft Information, Hard Information and Collateral. Journal of Financial Services Research,40(1-2), 29-48.
43. Yaldiz, E., Altunbas, Yener and Bazzana, Flavio. (2011). Determinants of Informal Credit Use: A Cross Country Study. Midwest Finance Association 2012 Annual Meetings Paper.