Political Connections, Local Corruption, and Firm's Bank Pool Structures: Empirical Evidence from Vietnam

Abstract

This paper investigates the effects of political connections and local corruption on the structures of firms’ bank pools. Using a manually collected data set of 389 listed Vietnamese companies in 2013, it finds that politically connected firms tend to establish their main bank relationships with connected banks. It also finds that connected firms reduce their numbers of banks and their diversity of bank ownership types in their bank pools when they achieve main bank relationships with connected banks; such firms maintain these bank pool structures when corruption is prevalent in their home provinces. Results demonstrate that local corruption is associated positively with number of banks and diversification of bank ownership types.