Luận văn thạc sĩ UEH networks and bank financing, the study of SMEs in vietnam

VIETNAM-NETHERLANDS PROGRAM

FOR MASTER OF ARTS IN DEVELOPMENT ECONOMICS

Networks and Bank Financing:

The Study of SMEs in Vietnam

A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

DANG NGUYEN KHANG

Academic Supervisor:

DR. DINH CONG KHAI

HCM, December, 2013

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ABSTRACTS

Small and medium-size enterprises (SMEs) play crucial roles in the economy. They

generate over 60% employment in many countries and are the key factor for the economic

growth. SMEs, however, face constraints to access external finance, which negatively impacts

on their business performance and growth. Therefore, a research on SMEs’ ability to access to

external finance poses a significant important issue for academic scholars and policy makers.

In such emerging countries as Vietnam, bank financing tends to be the most importance

financial resources for SMEs. However, the bank employs credit rationing because of

asymmetric information between banks and SMEs. Networks may be the most effective

channels for SMEs to overcome information asymmetries, thus enabling them to gain access

to external financial resources. The objective of this study is to investigate the effects of

supporting networks and network diversity on banking financial accessibility of SMEs in

Vietnam. Particularly, four types of networks including networking with government officials,

bank officials, business associations and network diversity will be examined in depth.

Longitudinal data set of more than 1500 manufacturing SMEs in Vietnam from 2007 to 2011,

random effect estimator and Stata program will be employed in this research.

Key words: Networks, Bank financing, SMEs

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ACKNOWLEDGMENT

Foremost, I would like to gratefully and sincerely thank my supervisor, Dr. Dinh Cong

Khai, for his valuable guidance, insightful comments and supports in all the time of research

and writing of this thesis.

Besides, I would also like to thank Dr. Truong Dang Thuy and Dr. Pham Khanh Nam,

who gave me assistance and guidance through my thesis process. Another special thank goes

to all the lecturers for their wonderful knowledge, and program administrator and technical

staffs at the Vietnam – Netherlands Program for their help during the time I studied in the

program.

Last but not least, I would like to thank my family and friend for their support and

encouragement not only through my thesis process but also throughout my life.

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CONTENTS

ABSTRACTS ....................................................................................................................................... i

ACKNOWLEDGMENT...................................................................................................................ii

LIST OF TABLES ............................................................................................................................ vi

LIST OF FIGURES ........................................................................................................................viii

ABBREVIATIONS ........................................................................................................................... ix

1. INTRODUCTION ................................................................................................................. 1

1.1. Problem Statements............................................................................................................... 1

1.2. Research objectives................................................................................................................ 3

1.3. Research questions ................................................................................................................ 3

1.4. Scope of the research............................................................................................................. 4

1.5. Methodology ........................................................................................................................... 5

1.6. The structure of the research............................................................................................... 6

2. LITERATURES REVIEW .................................................................................................. 7

2.1. SMEs and Networks.............................................................................................................. 7

2.1.1. Overview of SMEs ................................................................................................................. 7

2.1.2. Networks concepts............................................................................................................... 10

2.2. Theoretical review ............................................................................................................... 10

2.2.1. Credit rationing theory by Stiglitz and Weiss (1981)..................................................... 11

2.2.2. Strength of weak ties theory by Granovetter (1973)...................................................... 13

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2.2.3. Resources Dependency Theory (RDT) by Pfeffer and Salancik (2003)...................... 14

2.3. Empirical review.................................................................................................................. 15

3. RESEARCH METHODOLOGY ...................................................................................... 25

3.1. Estimating Model................................................................................................................. 25

3.2. Variables and measurement............................................................................................... 26

3.3. Data description ................................................................................................................... 28

3.4. Selection estimators............................................................................................................. 30

3.4.1. Estimating fixed effects....................................................................................................... 30

3.4.2. Estimating Random effects ................................................................................................ 31

3.4.3. Pool OLS, Fixed effects or Random effects ..................................................................... 32

3.4.4. Choosing Pool OLS and Fixed effects by F-test.............................................................. 33

3.4.5. Choosing the Pool OLS and Random effects by LM-test.............................................. 34

3.4.6. Choosing Fixed effect and Random effects by Hausman test....................................... 34

4. EMPIRICAL RESULTS .................................................................................................... 36

4.1. Data analysis......................................................................................................................... 36

4.1.1. Data description ................................................................................................................... 36

4.1.2. Correlation matrix............................................................................................................... 37

4.1.3. Network over time ............................................................................................................... 38

4.1.4. Networking with government officials and bank loan................................................... 40

4.1.5. Networking with bank officials and bank loan ............................................................... 41

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4.1.6. Networking with business associations and bank loan .................................................. 42

4.1.7. Network diversity and bank loan ...................................................................................... 43

4.2. Selection estimator results.................................................................................................. 44

4.2.1. F-test: Choosing between FE and Pool OLS .................................................................. 44

4.2.2. LM-test : Choosing between RE and Pool OLS.............................................................. 44

4.2.3. Hausman test : Choosing between FE and RE ............................................................... 45

4.3. Regression results ................................................................................................................ 46

5. CONCLUSIONS AND POLICY IMPLICATION ........................................................ 51

5.1. Conclusions........................................................................................................................... 51

5.2. Policy Implications .............................................................................................................. 52

5.3. Limitation and Future research ........................................................................................ 53

REFERENCES ................................................................................................................................. 54

APPENDIX A: CHOOSING APPROPRIABLE ESTIMATOR.............................................. 59

APPENDIX B: ESTIMATION RESULTS .................................................................................. 61

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LIST OF TABLES

Table 2.1: Classification of SMEs in Vietnam ...........................................................................8

Table 2.2: Share of SMEs in total Enterprises ..........................................................................8

Table 2.3: The Ownership structure of SMEs...........................................................................9

Table 3.1: Variables and measurement ....................................................................................28

Table 3.2: Size of SMEs in the sample ......................................................................................29

Table 4.1: Description of the sample .........................................................................................37

Table 4.2: Correlation matrix between variables of the sample...........................................38

Table 4.3: Network over time (mean value).............................................................................39

Table 4.4: Level changed of network over time (%) ..............................................................39

Table 4.5: F-test results...............................................................................................................44

Table 4.6: LM-test results...........................................................................................................45

Table 4.7: Hausman-test results.................................................................................................45

Table 4.8: Regression results......................................................................................................48

Table A.1: Fixed Effects result...................................................................................................59

Table A.2: LM-test result............................................................................................................59

Table A.3: Hausman-test result .................................................................................................60

Table B.1: The estimated result .................................................................................................61

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