Small Business Investment: The Importance of Financing Strategies and Social Networks

Abstract

This study examines the association between financing strategies and firm investments. Employing theory of financing constraints and literature on formal/informal financing of small businesses to investigate a set of 15,851 observations of Vietnamese small businesses in 11 years, we suggest a pecking order of financing strategies in terms of firm investments, in ascending order as follows: (1) firms using no external finance, (2) firms using informal finance only, (3) firms using both formal and informal finance, (4) firms using formal finance only. In addition, we incorporate the theory of social capital to explore the moderating effect of networking on the relationship between financing and investment. Empirical results show that networks may enhance the relationship between informal finance and firm investments, but not formal finance.

Publication DOI: https://doi.org/10.1002/ijfe.2302
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: © 2020 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Uncontrolled Keywords: financing source,informal finance,investment,small business,social capital,Accounting,Finance,Economics and Econometrics
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Related URLs: https://onlinel ... .1002/ijfe.2302 (Publisher URL)
http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2020-10-05
Published Online Date: 2020-10-05
Accepted Date: 2020-09-16
Authors: Nguyen, Bach (ORCID Profile 0000-0003-1527-7443)

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