NDLI: 6 Are Politically Connected Firms Less Constrained in Credit Markets?

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2 The Vietnam SME Data, 2005–15

3 Capital Allocation, Credit Access, and Firm Growth

4 The Interaction of Institutional Quality and Human Capital in Shaping the Dynamics of Capital Structure

5 How Important Are Management Practices for the Productivity of Small and Medium Enterprises?

6 Are Politically Connected Firms Less Constrained in Credit Markets?

7 Why Do Household Businesses Stay Informal?

8 Slack Resources and Innovation in Vietnamese SMEs: A Behavioural, Stewardship, and Institutional Perspective

9 Certification and Business Risk

10 Pecuniary Returns to Working Conditions

11 Does Union Membership Pay Off? Evidence from Vietnamese SMEs

Acknowledgements

List of Figures

List of Abbreviations

Notes on Contributors

6 Are Politically Connected Firms Less Constrained in Credit Markets?

Content Provider	Oxford Academic
Author	Rand, John
Editor	John Rand Finn Tarp
Abstract	Utilizing a panel of over 2,000 Vietnamese micro, small and medium enterprises over a ten-year period, we analyse the importance of being politically connected on both access and cost-of-credit obtained from formal financial institutions. Controlling for unobserved time-invariant firm-level heterogeneity, productivity self-selection concerns, and access to alternative credit markets, we first show that political connections through membership of the Communist Party of Vietnam decreases the likelihood of being credit-constrained by 4 percentage points. Second, politically connected firms accessing credit face lower cost-of-capital than non-connected enterprises not excluded from formal financial markets. Third, we show firms would increase their debt burden between 20 and 72 per cent if all credit constraints were removed and their desire for external finance was fully met, and our credit gap estimates also that the impact of political connections is most valuable during periods of financial distress, and less prevalent during business cycle upswings.
Related Links	https://academic.oup.com/book/40407/chapter/347267893/chapter-pdf/49854185/oso-9780198851189-chapter-6.pdf
Ending Page	133
Starting Page	115
ISBN	9780198851189
DOI	10.1093/oso/9780198851189.003.0006
e-ISBN	9780191885921
Language	English
Publisher	Oxford University Press
Publisher Date	2020-02-18
Access Restriction	Open
Subject Keyword	Asian Economics Economic Development and Growth Economics Social Sciences Vietnam Micro Small and Medium Enterprises Credit Access Credit Constraints Political Connections
Content Type	Text
Resource Type	Chapter
Subject	Economics and Econometrics

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