Doctoral thesis: Firms’ investment – cash flow relationship in the context of state ownership and banking system reform in Vietnam

The second essay examines the effect of banking system reform, which is defined by the presence of foreign banks, on investment-cash flow relation in a context of a small transition economy. I find evidence that the presence of foreign banks in Vietnam results in decreasing in firm’s dependence on local banks and has changed their financial constraint. Company investments are less reliant on internal cash flow in the post reform period. Although overinvestment of state controlled firms can not be reduced but underinvestment problem of non- state -controlled listed firms is mitigated due to better accessibility to bank loans. The investigated relation between investment and leverage is robust for this conclusion.