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Capital Structure and Investment Financing of Small and Medium-Sized Enterprises in Vietnam

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  • Huong Thi Trinh
  • Makoto Kakinaka
  • Donghun Kim
  • Tae Yong Jung

Abstract

Insufficient sources of internal financing and inaccessibility of external financing are acknowledged as crucial constraints on new investment for small and medium-sized enterprises (SMEs). This study examines how capital structure is related to investment decision for SMEs in Vietnam. In particular, we investigate the effect of capital structure on the decision to seek new investment as well as the choice of its financing sources. The main results reveal that SMEs with high financial leverage tend to engage more in seeking new investment. Moreover, empirical results demonstrate that among SMEs seeking new investment, those with higher financial leverage are more likely to choose external financing rather than internal financing. These results confirm the dynamic feature of the pecking order theory in the context of SMEs’ capital structure in Vietnam.

Suggested Citation

  • Huong Thi Trinh & Makoto Kakinaka & Donghun Kim & Tae Yong Jung, 2017. "Capital Structure and Investment Financing of Small and Medium-Sized Enterprises in Vietnam," Global Economic Review, Taylor & Francis Journals, vol. 46(3), pages 325-349, July.
    • Handle: RePEc:taf:glecrv:v:46:y:2017:i:3:p:325-349
    DOI: 10.1080/1226508X.2017.1340184
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    Cited by:

    1. Zhang, Ge & Guo, Bingnan & Lin, Ji, 2023. "The impact of green finance on enterprise investment and financing," Finance Research Letters, Elsevier, vol. 58(PD).
    2. Quynh Trang Phan & Poomthan Rangkakulnuwat, 2022. "How price informativeness affects the sensitivity of investment-to-stock price in Vietnamese listed firms," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 12(1), pages 28-61.
    3. Silvia Kirova, 2020. "The Factors Behind Bulgaria’s (Non) Convergence," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 6, ejes_v6_i.
    4. Hoang Huy Nguyen & Chi Minh Ho & Duc Hong Vo, 2019. "An Empirical Test of Capital Structure Theories for the Vietnamese Listed Firms," JRFM, MDPI, vol. 12(3), pages 1-11, September.
    5. Bo Yan & Meng‐Ru Liang, 2023. "Alleviation effect of supply chain finance on financing constraints of high‐tech small‐ and medium‐sized enterprises," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1634-1641, April.

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