Do intangible assets help SMEs in underdeveloped markets gain access to external finance?—the case of Vietnam

The credit frictions encountered by small and medium-sized enterprises (SMEs) have been widely examined in the entrepreneurship literature. Although theory suggests that asset tangibility helps increase firms’ borrowing capacity because it allows creditors to take possession of a firm’s assets more easily, this paper provides new evidence about the role of intangible assets in reducing credit frictions for SMEs. Using an extensive dataset of more than 155,852 SMEs in Vietnam and a multivariate probit model, we find that identifiable intangible assets improve firm access to debt and equity finance. Interestingly, it is found that the friction-reducing effect of intangibles is stronger on debt finance than on equity finance, suggesting non-equivalent distributional effects of intangible assets on firm capital structure. Moreover, firm age and size can moderate the association between intangibles and access to the two sources of external finance.