The banks’ uses of smaller companies’ financial information in the emerging economy of Vietnam: a user's oriented model

Abstract

Purpose – The aim of this study is to provide insights into the factors affecting the banks’ use of financial information in financial statements of small- and medium-sized enterprise (SME) which has implications for the governance of these important organizations. Specifically, this study assesses the views of bank lending officers on their demand for and use of financial information relating to SMEs.

Design/methodology/approach – The study uses the data collected from a quantitative study in the form of a postal questionnaire survey. The model is constructed based on the data collected and the use of structural equation modelling (SEM).

Findings – The research finds that the main factor affecting the use of financial information is the directors’ perceptions of the role of accounting. Bank lending officers tend to use a great variety of sources of information to make lending decisions and do not rely on financial information provided by SMEs. Direct contacts with the SMEs were extensively used and were perceived as having a significant effect on the utility of information.

Research limitations/implications – The limitation of the study lies in the relatively small sample of respondents and the response rate.

Practical implications – The model is important as it can aid the banks’ understanding of the business activities of the smaller company sector. This leads to improved relationships between the banks and smaller companies and more positive lending decisions.

Originality/value –The model is of interest to the banks and other parties. The model may also be of interest to accounting regulators and standard setters to clarify the issue of how financial information of smaller companies is used. The model implies the revision of the current reporting frameworks to improve the transparency of the corporate governance in SMEs in the context of the less developed reporting environment of transitional economies.

Citation

Dang-Duc, S., Marriott, N. and Marriott, P. (2008), "The banks’ uses of smaller companies’ financial information in the emerging economy of Vietnam: a user's oriented model", Tsamenyi, M. and Uddin, S. (Ed.) Corporate Governance in Less Developed and Emerging Economies (Research in Accounting in Emerging Economies, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 519-548. https://doi.org/10.1016/S1479-3563(08)08017-1