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Does innovation promote access to informal loans? Evidence from a transitional economy

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  • Cuong, Ly Kim
  • Hau, Hoang Tran

Abstract

This paper examines the way innovation can promote access to informal loans. Using a sample of Vietnamese small and medium-sized enterprises, our results reveal that more innovative firms are less likely to seek informal loans for their funding needs. This study also shows that innovative activities boost firm exports, and improve a firm's chances of securing government financial support, which in turn reduces their need for the informal credit market. Older firms and formal firms are found to be less likely to obtain informal loans. We suggest that government provides firms with more governmental support to stimulate the transparency of the credit market via financial institutions.

Suggested Citation

  • Cuong, Ly Kim & Hau, Hoang Tran, 2021. "Does innovation promote access to informal loans? Evidence from a transitional economy," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320301070
    DOI: 10.1016/j.frl.2020.101718
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    2. Bui, Tuyen Quang & Do, Anh Vu Phuong, 2022. "Does technological inclusion reduce financial constraints on small and medium sized enterprises? The case of Vietnam," Finance Research Letters, Elsevier, vol. 47(PA).

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    More about this item

    Keywords

    Innovation; Small and medium-sized enterprise; Informal loan;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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