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‘Credit Constraints and Determinants of the Cost of Capital in Vietnamese Manufacturing’

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  • John Rand
Abstract
This paper examines the extent to which borrowing constraints restrict firm access to credit and identifies individual, firm, and loan characteristics, which determine the cost of capital in Vietnamese manufacturing. Using direct information from a Vietnamese enterprise survey the paper shows that between 14 and 25% of the enterprises are credit constrained, and these enterprises would increase their debt holdings by between 40 and 115% if borrowing constraints were relaxed. Moreover, it emerges that informal credit markets play an important role for fast growing firms. Enterprises do not appear to have the necessary time to go through the many administrative difficulties in the formal credit system if they want to “seize the day”. Finally, collateralized loans face larger interest rates, explained by the significant influence of “policy lending” in Vietnamese credit markets. Copyright Springer 2007

Suggested Citation

  • John Rand, 2007. "‘Credit Constraints and Determinants of the Cost of Capital in Vietnamese Manufacturing’," Small Business Economics, Springer, vol. 29(1), pages 1-13, June.
    • Handle: RePEc:kap:sbusec:v:29:y:2007:i:1:p:1-13
    DOI: 10.1007/s11187-005-1161-2
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    More about this item

    Keywords

    credit constraints; financial markets; Vietnam; O16; O53;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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