Small business investment: The importance of financing strategies and social networks

This study examines the association between financing strategies and firm investments. Employing theory of financing constraints and literature on formal/informal financing of small businesses to investigate a set of 15,851 observations of Vietnamese small businesses in 11 years, we suggest a peckin...

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Bibliographic Details
Published inInternational journal of finance and economics Vol. 27; no. 3; pp. 2849 - 2872
Main Author Nguyen, Bach
Format Journal Article
LanguageEnglish
Published Chichester, UK John Wiley & Sons, Ltd 01.07.2022
Wiley Periodicals Inc
Subjects
financing source
informal finance
investment
Small business
Social capital
Vietnam
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Summary:This study examines the association between financing strategies and firm investments. Employing theory of financing constraints and literature on formal/informal financing of small businesses to investigate a set of 15,851 observations of Vietnamese small businesses in 11 years, we suggest a pecking order of financing strategies in terms of firm investments, in ascending order as follows: (a) firms using no external finance, (b) firms using informal finance only, (c) firms using both formal and informal finance and (d) firms using formal finance only. In addition, we incorporate the theory of social capital to explore the moderating effect of networking on the relationship between financing and investment. Empirical results show that networks may enhance the relationship between informal finance and firm investments but not formal finance.
ISSN:1076-9307
1099-1158
DOI:10.1002/ijfe.2302