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Local institutions, external finance and investment decisions of small businesses in Vietnam

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  • Nguyen, Bach

Abstract

This study investigates the impacts of local institutions, external finance, and their joint effects on firm investment in Vietnam. Investment decisions are classified into two categories: fixed asset investment and non-fixed asset investment. Analysing a set of 1.3 million firm-year observations of businesses in Vietnam (2006–2016), we find evidence that local institutions (both formal and informal) positively influence fixed asset investment but negatively affect non-fixed asset investment. Also, we find that informal loans are positively associated with both types of firm investment while bank loans are negatively associated with both types of firm investment. More importantly, we find that the quality of local institutions is able to moderate firms’ external financing behaviour, leading to increased investment values.

Suggested Citation

  • Nguyen, Bach, 2021. "Local institutions, external finance and investment decisions of small businesses in Vietnam," Economic Systems, Elsevier, vol. 45(3).
    • Handle: RePEc:eee:ecosys:v:45:y:2021:i:3:s0939362521000285
    DOI: 10.1016/j.ecosys.2021.100880
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    More about this item

    Keywords

    Small business; Investment; Informal finance; Informal institutions; Vietnam;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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