SME financing role in developing business environment and economic growth: empirical evidences from technical SMEs in Vietnam

Van Song, Nguyen; Mai, Tran Thi Hoang; Thuan, Tran Duc; Van Tien, Dinh; Phuong, Nguyen Thi Minh; Van Ha, Thai; Que, Nguyen Dang; Uan, Tran Ba

SME financing role in developing business environment and economic growth: empirical evidences from technical SMEs in Vietnam

2022

Distinguishing the significance of business environments for technical small and medium-sized enterprises (SMEs), this study examines the connection between business environments, GDP growth, and SMEs’ financing choices in Vietnam. The study considered the agency theory as a theoretical base to explain how information asymmetry between SMEs and lenders influences SMEs’ financing choices and encompasses the effects on business environment and GDP growth of Vietnam. For this binary logistic regression, text is applied. Global Entrepreneurship Monitor and World Bank data were analyzed. The findings of the study are robust and showed that SME financing (e.g., formal and informal) under the financial infrastructure and tax regulation may enhance formal credit choice and reduce informal credit choice. This enhances the depth in the business environment of technical SMEs and found significant effects on GDP growth. For the first time, this research examines the impact of information asymmetry and agency theory on restaurant financing choices. The research has significance for industry practitioners and governments interested in SMEs’ financial viability. On the recent topicality, study also presents policy implications for key stakeholders.

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