Banking system reform and investment–cash flow relation: Case of a small transition economy

Tu Thi Kim Thoa and Nguyen Thi Uyen Uyen

Research in International Business and Finance, 2017, vol. 41, issue C, 500-515

Abstract: This research examines the effect of banking system reform which is measured by foreign bank's presence on investment–cash flow relation in a context of a small transition economy. The U-shape relation between investment and cash flow is found. We also find evidence that the presence of foreign banks in Vietnam results in decreasing in dependence on local banks and has changed corporate investment behaviors. Company investments are less reliant on internal cash flow in the post reform period. Although overinvestment of state controlled firms is not reduced but underinvestment problem of non-state-controlled listed firms is mitigated due to better accessibility to bank loans. The investigated relation between investment and leverage is robust for this conclusion.

Keywords: Banking system reform; Investment–cash flow sensitivity; Vietnam (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:41:y:2017:i:c:p:500-515

DOI: 10.1016/j.ribaf.2017.04.038

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