Getting bank financing: A study of Vietnamese private firms

Abstract

Private firms in transition economies are operating in an extremely uncertain environment, with underdeveloped market institutions, poorly defined property rights, and absence of reliable business data. This raises a very basic question of how owners of these firms persuade bankers to make much needed loans. This study employs an institutional perspective and argues that firms' legitimacy positively influences their accessibility to bank financing. Specifically, this study develops a model that links networking, professional management practices, and growth stage with bank financing and tests that model using a sample of Vietnamese private firms. The results support the hypotheses that growth stage and networking greatly influence firms' accessibility to bank financing, and that the impact of networking on financing is contingent on the growth stage. © Springer Science + Business Media, LLC 2006.