Bank ties, institutional pressures, and capital structure of Vietnamese SMEs

Purpose: This article studies the moderating effect of institutional pressures on the impact of bank ties on the capital structure of small and medium-size enterprises (SMEs). Design/methodology/approach: The study uses an unbalanced longitudinal dataset covering three years—2011, 2013 and 2015—from a project on small manufacturing enterprises in Vietnam. The sample consists of 7,680 firm-year observations. Findings: Pressures from formal and informal institutions lessen the positive effect of bank ties on the capital structure of SMEs. These moderating effects are more salient in regions having lower institutional quality. Originality/value: Empirically showing how institutional factors can be investigated together with relational factors to explain the capital structure of SMEs in a developing economy. Distinguishing between formal and informal institutional pressures and revealing their indirect effect on SMEs' capital structure through impacting the effect of bank ties.