Corruption and SME financing structure: the case of Vietnamese manufacturing

Abstract

PurposeCorruption has been evidenced as one of the major factors that drive a firm's dynamics and growth. This study examines the relationship between corruption and financing structure decisions of small and medium-sized enterprises (SMEs) in Vietnam.Design/methodology/approachThe authors use a longitudinal data set from the Vietnam's SME Survey in the period 2007–2013 and adopt the two-stage least squares method to deal with endogeneity.FindingsAfter controlling for endogeneity and firm heterogeneity, the authors find that, overall, corruption does significantly affect the decisions of financing sources. Given that, corruption increases the use of informal debt and decreases the levels of formal debt, owner's equity and retained earnings.Practical implicationsThe findings suggest implications for corruption-combating actions and policies.Originality/valueDifferent from previous studies that either provide evidence of government corruption and a firm's capital structure at the country level or focus on corruption and debt only, we deliver a more comprehensive analysis on the nexus between corruption and various financing sources.

Female Managers and Corruption in SMEs: A Comparison Between Family and Nonfamily SMEs in Vietnam

“…Additional robustness check has been conducted by taking variable BRIBE-DUMMY as a dummy dependent variable to assess the reliability of the research. Due to the logarithm of bribe amount chosen as a dependent variable and evidence in previous research (Phan & Archer, 2020), a logistic model is used for the robustness check. This robustness test fulfill the problem of natural logarithm with firms that do not bribe by doing logistic regression with dependent variable (bribe or not).…”

“…As reviewed by Phan and Archer (2020), we choose a set of control variables consisting of assets (log. ; ASSET) and revenue (log.…”

“…This is the independent variable of model 2 Control variables. As reviewed by Phan and Archer (2020), we choose a set of control variables consisting of assets (log. ; ASSET) and revenue (log.…”

“…With the usual number of employees less than 10 people, household businesses trades goods that do not require too much technology such as grocery store, food store, making salt, doing business in street vendors, and snacking. In the situation of an emerging country like Vietnam, the number of SMEs in 2018 was about 600,000 businesses, accounting for 97.6% of all firms, which contributed to approximately 50% of total employment and 40% of GDP (Phan & Archer, 2020). In SMEs, household businesses accounted for a large proportion, which contributed to approximately 80% of jobs and 31.2% of the GDP of the Delta areas in 2011 (Giang et al, 2016).…”

Formality and investments: Evidence of Vietnamese SMEs

“…Data are employed from the Survey of Small and Medium Scale Manufacturing Enterprises in Vietnam, which was conducted biennially from 2005 to 2013 with the purpose to gather and analyze data of the private sector in Vietnam (Nguyen et al, 2019;Phan and Archer, 2020). This survey was implemented in ten provinces (Ten provinces include: Ha Noi, Phu Tho, Ha Tay, Hai Phong, Nghe An, Quang Nam, Khanh Hoa, Lam Dong, Ho Chi Minh City, and Long An) across Vietnam under the research cooperation between the Central Institute for Economic Management (Vietnam), Institute of Labor Science and Social Affairs (Vietnam), and the University of Copenhagen (Denmark).…”