Credit Access and the Firm–Government Connection: Is There Any Link?

Author:

Phan Trang Thu1,Ta Linh Nhat1,Pham Trang Tran Minh2,Pham Dung Thi Thuy1

Affiliation:

1. School of Banking and Finance, National Economics University, Hanoi 100000, Vietnam

2. Faculty of Investment, National Economics University, Hanoi 100000, Vietnam

Abstract

Access to credit for businesses is an unresolved issue, especially in developing countries and transition economies. There has been a lot of research exploring factors affecting firms’ credit accessibility. Particularly, factors related to borrowers and lenders are always placed under consideration. However, besides those factors, institutional elements could also play an important role in guiding companies’ operations. In countries where the economy lacks transparency and low-level development is limited, informal institutional factors can have potential impacts. In this paper, we focus on exploring the relationship between firm–government links and credit access, thereby offering managerial implications through utilizing cross-sectional data sets at the firm level, with an initial sample of 26,849 observations from 38 countries at different levels of development around the world. The results show a positive correlation of firm–government connection with credit access. Moreover, this relationship may vary depending on the market in which the business primarily operates. Specifically, firms working internationally are less influenced by links with governments and tend to rely more on their own characteristics and conditions.

Funder

National Economics University, Hanoi, Vietnam

Publisher

MDPI AG

Subject

Finance,Economics and Econometrics,Accounting,Business, Management and Accounting (miscellaneous)

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