Premium
Small business investment: The importance of financing strategies and social networks
Author(s) -
Nguyen Bach
Publication year - 2022
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2302
Subject(s) - pecking order theory , finance , internal financing , order (exchange) , economics , vietnamese , external financing , pecking order , investment (military) , risk financing , corporate finance , capital structure , business , debt , politics , linguistics , philosophy , evolutionary biology , biology , political science , financial risk management , law , risk management
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: (a) firms using no external finance, (b) firms using informal finance only, (c) firms using both formal and informal finance and (d) 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.