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This article investigates the effect of residual state ownership on trade credit in Vietnam. The empirical results show that a substantial withdrawal of the state from listed state-owned enterprises (SOEs) does not disturb these firms’ supply of and demand for trade credit, suggesting that trade credit is not a source of soft budget constraint and local privatisation programmes have not been motivated by efficiency. Privatisation seems to be a transitional phenomenon in a state-dominated economy that is inadequately supportive of private sector development and a poor legal system encouraging informal contracts. Interestingly, Vietnamese firms with more accounting conservatism, probably in response to their creditors’ increasing demand for financial reporting quality, are found to provide less trade credit, suggesting that adopting more conservative accounting arising from the government’s privatisation may be associated with firms’ better accessibility to bank credit.

Trade credit in transition economies: does state ownership matter?