The lasting effect of formalization on credit access: Evidence from Vietnamese private SMEs

Thao Duc Truong and Phuong Cam Bui

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This study adds to the literature by evaluating for the first time not only the short-term but also the long-term effects of formalization on loan access for small and medium-sized enterprises (SMEs) in Vietnam between 2005 and 2015. We find that businesses that formalize their status have a better chance of obtaining a formal loan, but the benefits of formalization are only apparent in the short term and not in the long run (five, seven or more years). Also, our study indicates that promoting formalization and loan availability for private SMEs in Vietnam requires encouraging the adoption of accurate financial records, accounting books, and anti-corruption measures.

Keywords: Formalization; Credit access; Heckman and Instrumental variable; SMEs (search for similar items in EconPapers)
JEL-codes: G21 J16 L26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000526

DOI: 10.1016/j.frl.2022.102729

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