Firms’ perception of access to green finance in an emerging economy - How smaller firms

view greener financial option

Dang Ngoc Quang

Oxford Brookes University

Abstract

The paper investigates the perceptions and drivers of using green finance as a source of capital
for firms in Vietnam. Using survey evidence from 53 firms in wide-range industries in the North
and South of Vietnam, the research reveals how firms in a rapidly developing economy raise
their finance, in which the economy’s growth was attributed to industrial development and heavy
reliance on non-renewable energy sources. The results show that most of the firms knew the cost
of using green finance was lower than that of traditional sources, yet it was the more complex
and more information required that discouraged them from applying for green finance sources.
Furthermore, the survey also reveals what motivates managers to use green finance, and the
result shows that the government regulations, reputational benefits, and lower and more
diversified source of finance are the main drivers for firms to access and use green finance.

1
 I. Introduction

Green finance has no longer been a far-fetched concept to global economies, with countries have
signed the Paris Agreement which is a legally binding international treaty to tackle global
environmental and climate issues (Dimitrov,2016; Blau, 2017). However, the concept has only
been paid attention mainly by developed economies, which could be seen through the amount of
green bond issued account for two-thirds of global green bond volume, and larger developing
economies such as China, who is the leading green bond issuing country (CBI, 2023). On the
other hand, there had been only minor signs of participation of smaller size developing
economies, yet in the near future these economies would have to face the consequences of
climate and environmental externalities associated with economic growth. While there had been
attempts to incorporate green finance in to their financial markets, further research into this area
is proved necessary.

Over the last decade, Vietnam has enjoyed fast economic growth between 6%-9% GDP per year.
The country has been able to make its mark on the global map without-of-expectation economic
growth among other developing countries in Asia, scoring a phenomenal average growth rate of
6.9% during the 2000-2019 period and continued to show its resilience throughout the COVID-
19 pandemic. The secret to such strong growth is no secret at all– by focusing on shifting away
from an agriculture-reliant economy to upgrading industrial infrastructure and turning itself into
a global value chain hub by focusing on green and resilient infrastructure and human resource
development (World Bank, 2023). Therefore, the demand for energy undeniably skyrocketed, as
the energy consumption would suggest economic growth and industrial-oriented economy
(Nguyen et al., 2019). Given the country’s growing reliance on fossil fuels (Figure 1) (IEA,
2023), the electricity sector accounts for approximately two-thirds of greenhouse gas emissions.
A critical problem for Vietnam is to manage its rapid economic growth sustainably. As shown by
its fast industrialization and urbanization in the recent decades, Vietnam’s structural
transformation has significantly enhanced the country’s standard of living while increasing its
green economic recovery and susceptibility to climate change.

2
 2,500,000.00

2,000,000.00

Energy Output (Unit: TJ)

1,500,000.00

1,000,000.00

500,000.00

-
1990 1995 2000 2005 2010 2015 2020

Coal Natural gas Hydro

Biofuels and waste Oil Wind, solar, etc.

Figure 1: Vietnam Energy Output Composition

Source: IEA (2023)

To tackle the limitation of such a carbon-intensive economic model, the government has initiated
policies that mitigate the impact of climate change, transform the growth model towards green
growth. According to Zimmer et al. (2015), Vietnam first approved the National Climate Change
Strategy (NCCS) in 2011 and Vietnam National Green Growth Strategy (VGGS) in 2012, which
combined energy, economic growth and environment sustainability as the target for a low-carbon
economy. Furthermore, the focus was then casted on renewable energy, with tax relief and
supportive policies were revised and approved in the late 2010s, which further prove the
determination of Vietnam in its low-carbon transition.

In order to realise such goal, it is necessary to have financial tools to facilitate the transitional
process. However, Vietnam’s financial market is immature, with a small market size and
undiversified financial instrument types. The domestic stock market is small in scale and weak in
structure, with a lack of diversity in market commodities. In addition, it has an immature bond
market structure, in which the government bond segment holds the majority market share.
Furthermore, it is difficult to issue long-term bonds, since the market prefers short-maturity ones.
In 2017, the bonds with over a 10-year period only comprised 22% of the total outstanding value
of bonds issued. Because of the small size of the capital market, financing for businesses is
heavily reliant on bank credit capital (Banking Strategy Institute, 2015). However, funding via

3
Viet Nam’s banking system is also challenging due to the common view among domestic banks
that renewable projects are a risky and strange business. Although, Vietnamese banks have been
more interested in their green lending portfolio to date, the most significant obstacle that banks
face is their inadequate capacity for processing green credit appraisals, including the risk
assessment and evaluation of new technologies. The expectation for new and innovative
financial vehicles, such as green bonds, is that they will provide an additional financial channel
for renewable energy financing.

While most of literature in green finance had been dedicated to studying the financial
instruments and the framework for development markets for the exchange of those instruments,
little had been identified to investigate what motivates smaller firms and projects to use green
finance as their funding sources. Therefore, this paper aims to investigate how firms in Vietnam
decide how to raise funding for their investments, and their views and opinions on the use of
green finance compared to ‘traditional’ finance. The target of this paper could be translated into
two objectives:

1. To examine the financing behaviour of firms in Vietnam

2. To indentify what motivates or disincentives firms and managers to use green finance

This study is survey-based. Specifically, the study uses the responses from 53 firms in Vietnam
with varied business models and industry. The survey addressed three key areas: funding
behaviours, motivation when finding source of finance motivation for green finance, and
opinions on green financial instruments. The study is amongst the limited number of academic
studies that use survey evidence based on a sample of firms in a developing economy, enabling
to evaluate the research questions from a new perspective and to test the previous research
findings in the literature. It also offers insights into firms financing processes and drivers of their
decision-making which are not directly measurable based on archival market data. As such, the
study contributes to the broader literature in finance with survey evidence to analyse policies and
decisions of both firms and financial regulators.

II. Literature review

4
In recent years, the complex relationship amongst sustainable development, firm’s profit-making
and value-maximising goals has raised a phenomenal attention of research in financing decision
making in green projects. Green finance – as the relationship now coined as – has emerged as the
fundamental part in the green transition that offers an alternative financing pathway to
individuals, corporations and governments willing to fund and invest in green activities or low
carbon activities (Huang et al, 2019). The concept, while could be counter-intuitively believed to
originate from developed economies, is pivotal to the sustainability of the emerging economies,
especially those in the South East Asia region with rapid urbanisation and industrialisation.
Research into this topic in recent years had been focused on the standardization of green finance
definition the definition problems of green finance (Lindenberg, 2014; Berrou et al, 2019),
development of green finance market (Weber and ElAlfy, 2019), or the use of green finance by
firms and investors (Sangiorgi and Schopohl, 2023; Gianfrate and Peri 2019). However, the
financing decision-making process of firms seemed overlooked, with only the traditional
financing behaviour having been long investigate across many regions that provided mixed
results. Furthermore, the research is also of limited use since it used archival databases to
measure the drivers of the use of financial sources. The paper contributes to the literature by
expanding the topic of financing behaviour to the use of green finance via surveyed-preliminary
data.

2.1 Perception of the cost of green finance

An extent number of studies have been found in terms of cost of capital in financing behaviour.
Most of the research were carried out to investigate the determinants of financing decision based
on the characteristics of the companies, namely including profitability, size of firms, tangibility,
liquidity, past and future growth, uniqueness, non-debt tax shield, business risks, and agency
costs. In addition, industry and country specific factors such as interest rate, inflation, or average
industry indicators were also pointed out by Frank and Goyal (2009), yet their impacts were
rather indirect on firm-specific factors. Based on the systematic literature review of nearly 200
studies by Kumar et al. (2017), cost of capital as one of the determinants of capital structure has
been included. However, while this factor has been a long discussed and well-established,
embedded in the context of developed economies. Developing countries, with different tax and

5
institutional environment (Booth et al., 2001), are largely ignored. In other words, many studies
have been carried out to determine the factors that would affect the leverage and financing
decisions. In the case of Vietnam, Vo (2017) founded asset growth, ratio of tangible assets,
profit, firm size and liquidity would dictate how a firm would determine its leverage level and
the source of capital it would choose. However, the findings only account for a firm’s
characteristics and financial performance, which is only a facet in the financing decision process,
that other perspective should be considered such as access to certain source of capital. From
above review, it is proved a need to include cost of green finance as a factor affecting the
perception of firms in their access to green finance.

2.2 Perception of the application process to green finance

Information asymmetry, defined as a situation in which one party in a financial transaction

possesses more information than the other (Stiglitz, 2000; Akerlof, 1970), has profound
implications for the cost of finance and can lead to a more complicated finance process. In
financial markets, when borrowers or companies seeking funding have better information about
their financial health and risk profile than lenders or investors, they can potentially secure
financing at more favourable terms. Conversely, when lenders or investors have superior
information, they may demand higher interest rates or more stringent terms to compensate for the
increased risk. This information imbalance can result in a more complex and costly finance
process as parties engage in due diligence, information gathering, and risk assessment to bridge
the informational gap (Ross, 1973). As a result, addressing information asymmetry through
transparency, disclosure, and improved communication becomes crucial for greater disclosure
could allow these companies to benefit from a lower cost of debt thanks to the reduction of
information asymmetries and agency costs (Aman & Nguyen, 2013; Armstrong et al., 2010; Bryl
& Fijałkowska, 2020; La Rosa et al., 2018). The beneficial effect of disclosure in reducing
information asymmetries can also be extended to environmental impact disclosure via ESG
disclosure, which could serve as a tool to communicate information that is not included in the
financial disclosure (Raimo et al., 2021). Since the assessment for green finance is usually more
complicated due to recent lack in measurement of environmental impact, requiring additional
documentation and oftentimes costly ‘green’ certification may disincentivise firms from
applying for green funding.

6
2.3 Firm’s characteristics and strategic view
A firm’s business industry may be considered a reliable factor when examining accessibility to
finance. Beck et al. (2006) found that firms in manufacturing tend to be larger so they face fewer
financial obstacles. According to Silva and Carreira (2010), firms with more physical assets may
find it easier to get finance than enterprises in the service sector with “human capital,” due to the
collateral requirements of the banks. Those mean that firms in industries with more tangible
assets such as equipment and machines are likely to have fewer financing constraints. At the
same time, financial institutions are likely to lend to growth industry sectors or business types
that are eligible for preferential policies from the government. Levine (2005) ascertained that the
availability of external finance has a high impact on the machinery and manufacturing industry
due to high-level growth in this sector. However, this seems not the case of Vietnam. Firms in
Vietnam, especially those in the environmental sector, need to invest in equipment and
machines, with the side benefit of acquiring the ability to present more tangible assets to
financial institutions. The environmental sector is also a large growth industry with various
supporting policies from the government related to tax law, technology, human resources, and
investment capital. Therefore, it was contended that companies with a main business in the
environmental sector may benefit more from favourable government regulations and are more
likely to face fewer financing constraints than companies in other industries when it comes to
green finance. Le and Pham (2021) made exploratory research into this perspective in Vietnam
and found that it was the firm non-financial characteristics like legal forms, industry, and types
of business or to-be-financed projects that would enable firm’s access to certain capital sources.
All hypotheses are constructed in the form of null hypotheses. The summary of the 4 main
hypotheses is presented in Table 2.1.
Table 2.1 Hypothesis structure
Accepted
Hypothesis Null hypothesis (H0)
/Rejected
There is no association between the cost of green finance and
H1 Rejected
the perception of green finance.

H2 There is no association between the application process of Accepted

green finance and the perception of green finance.
H3 There is no association between the strategic adaptation of the Accepted
business and the perception of green finance.

7
 H4 There is no association between stakeholder’s focus of firms and Accepted
the perception of green finance.

III. Data collection

3.1 Data collection procedure
Regarding the data collection data, we sent the survey invitation to 300 companies across
Vietnam and managed to collect 53 responses, showing a response rate of around 17%. The
sample comprises 53 companies in Vietnam with different industries with different legal
ownership status, and the surveys were carried out by questionnaire form distribution to a
random data base of firms at provincial clusters provided by the General Statistics Office of
Vietnam (Appendix 1). The respondents were high-level managers of the firm, namely general
managers or chief accountants since they are in good position, knowledge and extent experience
in the field of capital sourcing. After three pilot tests with small sample respondents, the official
survey was carried out and the responses were then collected through pre-structure
questionnaires, which included 30 questions covering (1) the characteristics of the firms, (2) the
financing behaviour and strategy of the managers/experts, and (3) their perceptions on green
finance as a source of finance compared to traditional finance. The data collection was conducted
over a three-month period between July and October 2023, which were then translated,
standardized, coded into software and compared to the original entry to eliminate errors.

3.2 Respondent industrial characteristics

Table 3.1 provides an overview of the 53 respondents by the operation regions of the business
(Panel A), their legal status (Panel B), industry their main business in (Panel C). The sample
covers companies situated equally in both regions of Vietnam, yet most of the respondents were
most companies from private sector (69.8%) and foreign direct investment firms (24.5%). Most
of the respondents were in the industrial and production industries (62%), while the energy
sector only consisted of 11%. This is due Vietnam energy were supplied by major state-owned
companies, yet certain private investment into energy sector were able to be reached included
into the research.

Table 3.1 Respondent characteristics

8
 Panel A: Region Count Relative (%)
North 31 58.5
South 22 41.5

Panel B: Legal status of

Count Relative (%)
firms
FDI 13 24.5
JSC 1 1.9
Private Company 37 69.8
SOE 1 1.9
Other 1 1.9

Panel C: Industry Count Relative (%)

Energy 6 11.3
Multi-Industry 9 17.0
Bank/Financial Service 1 1.9
Industrial/Production 33 62.3
Construction 4 7.5

3.3 Hypothesis Testing Method and Model Development

From the developed hypothesis, to test whether if there are relationships between the outlook on
uses of green finance and other factors, correlation analysis would be used. However, while the
perception on the cost and requirements of green finance had been answered directly, the
motivations for using green finance were composed of multiple answers that are presented in
Question 19 (Appendix 1). Therefore, to reduce the dimension of the variable, factor analysis
would be employed for the variables to compose more meaningful variables. Using SPSS’s
factor analysis function, two variables were extracted which is presented in Tabel 3.2:

Table 3.2: Motivations for using green finance – factor analysis

Components Loading variables
The strategic Change of business model ( Motivation_BusinessModelChange)
adaptation of Green finance having lower cost of finance (Motivation_LowCost),
firms (STRAT) Diversifincation of finance source (Motivation_Diversification)
Government guildelines and standardization (Motivation_GovRegulation)
Climate change concerns (Motivation_ClimateChange)
The stakeholder’s Pressure from current shareholder (Motivation_ShareholderPressure)
focus of firms Financial market signal (Motivation_MarketSignal)
(STAKE) Increase stock price (Motivation_IncreaseStockPrice)
Previous successful operations of businesses in the same industry

9
 (Motivation_Peers)
Expectations from potential shareholder/investors
(Motivation_ShareholderExpection)

The analysis used the Unweighted Least Squares extraction method and the Varimax rotation
method with Kaiser Normalization. Additionally, it is important to note that the analysis was
performed only on cases where correspondents view the potential of green finance to be
potential. Table 3.3 showed the rotated factor matrix that the result of a factor analysis conducted
on a set of variables related to different motivations. It could be seen that the first may represent
a combination of motivations related to business strategy, adaptability, and environmental
considerations, while the second represent motivations related to external market influences and
shareholder expectations, particularly regarding stock price performance. Therefore, these factors
were renamed as the strategic adaptation of firms (STRAT) the stakeholder’s focus of firms
(STAKE).
Table 3.3: Rotated Factor Matrix

Factor
STRAT STAKE
Q19.Motivation_Reputation .523 .060
Q19.Motivation_BusinessMo .420 .204
delChange
Q19.Motivation_LowCost .473 .094
Q19.Motivation_Shareholder .055 .826
Pressure
Q19.Motivation_MarketSigna -.078 .904
l
Q19.Motivation_Diversificati .648 .056
on
Q19.Motivation_Shareholder .423 .460
Expection
Q19.Motivation_IncreaseStoc .197 .753
kPrice
Q19.Motivation_Peers .333 .368
Q19.Motivation_GovRegulati .695 -.003
on
Q19.Motivation_ClimateChan .778 .127
ge

10
11
 IV. Results
4.1 Survey results
Appendix 2 provides an overview of the responses of the rating questions that cover different
aspects in this research: panel A examines the financing behaviour of firms, specifically what
finance sources to use or goals to achieve when raising finance for new investments; Panel B
includes questions that investigate the perceptions of respondents on different aspects of green
finance in Vietnam, specifically green bonds and green loans as they are the current dominant
green finance instruments in the country.

Based on Table 4.1, it could be seen that equity was the preferable way of raising finance by
firms, with internal equity was the highest rated form of finance. External equity was second in
preference, with its score distributed evenly in the upper band score. On the other hand, debt
instruments, although were less preferred, share a roughly similar structure to one another. More
complex financial instruments like preferred shares and convertible preferred shares were less
popular among respondents, with majority of responses were not in favour. There was also a
near-perfect balance between two schools of thoughts about financing behaviour as responded,
in, which the first half of the firms follow a strict target leverage ratio that were coined as the
trade-off theory (TOT) by Modigliani and Miller (1958). The other half of the firms would
follow a hierarchy of financial sources that they would exhaust before moving to the next one,
which reflected the pecking-order theory (POT) by Myers (1985). This result partially
contradicted the findings by Nguyen et al. (2019) that found Vietnamese firms to specifically
have a target capital structure when choosing their ways of raising finance, yet it should be
reminded that firms under the study were mostly listed companies with more financial capability
and access to other sources of finance, whereas the correspondents under our study come mostly
from private sector with smaller scale.

Finally, the table shows a range of incentives for firms when raising finance for new
investments, and the responses showed mixed results. Overall, firms were most concerned about
maintaining long-term operation when raising finance, and their financial flexibility, which was
diversification of financial sources. These incentives were followed by concerns regarding the
beneficial tax rate from using debt instruments as well as the benefits from the non-debt tax
shields. On the opposite, criteria regarding stakeholders such as credit rating institution, dilution

12
of shareholder’s ownership and maximising traded securities were at the bottom of the list. Once
again, the interests found could be explained by the nature of our correspondent, since most of
them are private companies, thus emphasis were placed more on achieving better financial
performance and ensure survivability of the organisation. Furthermore,

Table 4.2 presents the focus to the perception of firms about green finance and what drives the
motivation for or prevents them from employing green finance into their capital structure.
Regarding their view on green finance compare to traditional finance, majority of the responses
viewed the cost of using green finance sources is lower than that of traditional finance sources
(58%), yet to be able to gain access to such sources, higher requirement barriers were needed to
gain access to green finance (58%) and more barriers need to be overcome. On the other hand,
the main motivation for firm to use green finance is the government regulation, suggesting that if
the government enable more guidelines for access to green finance and market development,
firms would be more willing to use green finance. Furthermore, it could be seen that financial
flexibility and performance were maintained to be the priorities of the correspondents and they
would be more willing to use green finance given that it could bring in benefits such as better
reputations, lower cost of finance, or act as another source of finance. Although concerns for
climate change did not fall far behind those benefits, accounts for the environment were eclipsed
by firm performance maximisation, suggesting that firms on smaller scale, while having become
more aware of the issue, appeared to do not account the environmental impact in their financing
decision-making. While these benefits could be the attraction point of green finance, certain
aspects could make the finance source unattractive: as the market as well as guidelines and
standardizations of green finance in Vietnam were underdeveloped, they were the top concerns
that discourage firms from considering green finance into their financing strategy. This was also
reflected in firms being unable to define a suitable project that fit in the requirements due to lack
of a clear definition of green finance that deter firms from using it.

13
Table 4.1: Financing behaviour

1. Firm's fundraising strategy

Frequency Percent (%)

Find ways to maintain

the target debt/equity
26 49.1
ratio to optimize
capital costs

Balance between two

2 3.8
strategies

The most accessible

capital source will be
25 47.2
used before other
sources are used

2. Preferred financial instruments when raising finance

Convertible Convertible
Internal equity External equity Direct debt Preferred share
debt preferred share
N 53 53 53 53 53 53
Mean 4.06 3.4 2.94 2.75 2.72 2.57
Median 5 4 3 3 3 2
Mode 5 4a 3 3 3 2
Std. Deviation 1.392 1.378 1.216 1.072 1.215 1.279
Variance 1.939 1.898 1.478 1.15 1.476 1.635
Range 4 4 4 4 4 4
Minimum 1 1 1 1 1 1
Maximum 5 5 5 5 5 5

3. Drivers of firm's company/organization's financial decisions:

1
 Maximize the Ensuring the Maintain Maintain high Level of
Maintain
price of publicly long-term comparability debt ratings of Corporate depreciation
financial
traded survival of the with industry credit income tax rate and non-debt
flexibility
securities business peers institutions tax shield
N 53 53 53 53 53 53 53
Mean 2.62 4.17 4.55 3.98 2.68 4.15 4.11
Median 3 4 5 4 3 5 4
Mode 1 5 5 4 3 5 4
Std. Deviation 1.457 0.995 0.845 0.82 1.312 1.099 0.824
Variance 2.124 0.99 0.714 0.673 1.722 1.208 0.679
Range 4 4 3 3 4 4 3
Minimum 1 1 2 2 1 1 2
Maximum 5 5 5 5 5 5 5

Avoid diluting
Risk of Expected cash Avoid
the ownership
insolvency Control voting flow/income Risk of invested mispricing
rights of
leading to rights from invested assets upcoming
common
bankruptcy assets securities
shareholders
N 53 53 53 53 53 53
Mean 3.94 3.17 3.51 3.6 2.58 2.62
Median 4 3 4 4 3 3
Mode 5 4 3 3a 1 1
Std. Deviation 1.082 1.205 1.137 1.149 1.292 1.39
Variance 1.17 1.451 1.293 1.321 1.671 1.932
Range 4 4 4 4 4 4
Minimum 1 1 1 1 1 1
Maximum 5 5 5 5 5 5

2
Table 4.2: Perceptions on green finance
2. Requirements for access to green finance compared to
1. Cost of green finance compared to traditional finance
traditional finance
Frequency Percent Frequency Percent

Lower 31 58.5 More complicated 31 58.5

Equal 10 18.9 Same 8 15.1

Higher 12 22.6 Less complicated 14 26.4

Total 53 100 Total 53 100

3. Benefits from using green finance

Change the business Pressure from current Governmen
Reputation benefits Low cost Market signals
model investors/shareholders t regulation
N 53 53 53 53 53 53
Mean 3.77 3.58 3.74 3 2.91 4.06
Median 4 4 4 3 3 4
Mode 5 4 3 3 3 5
Std. Deviation 1.203 1.151 1.003 1.038 1.079 1.099
Variance 1.448 1.324 1.006 1.077 1.164 1.208
Range 4 4 4 4 4 4
Minimum 1 1 1 1 1 1
Maximum 5 5 5 5 5 5
Expectations of Previous successful
Diversify financial Commitments to limit potential operations of
To increase stock prices
sources climate change investors/shareholde businesses in the
rs same industry
N 53 53 53 53 53
Mean 3.77 3.51 3.26 2.68 3.4
Median 4 3 3 3 4
Mode 5 5 3 3 4
Std. Deviation 1.103 1.295 1.095 1.123 1.149
Variance 1.217 1.678 1.198 1.261 1.321
Range 4 4 4 4 4
Minimum 1 1 1 1 1

1
Maximum 5 5 5 5 5

Lack of Difficulty
awareness/knowledg Lack of suitable Lack of demand The market is not fully Investor with
e about green projects from stakeholders developed preference payment
financial tools settlements
N 53 53 53 53 53 53
Mean 3.7 3.79 3.51 3.75 3.15 3.11
Median 4 4 4 4 3 3
Mode 5 5 4 5 3 3
Std. Deviation 1.339 1.335 1.171 1.254 1.133 1.235
Variance 1.792 1.783 1.37 1.573 1.284 1.525
Range 4 4 4 4 4 4
Minimum 1 1 1 1 1 1
Maximum 5 5 5 5 5 5

2
 4.2 Hypothesis testing result
Table 4.3: Non-parametric correlations

Q7.EvaluateVn Q8.EvaluateGreen Q9.EvaluateGre

STRAT STAKE
GreenFin FinCost enFinProcess

Correlation
1 -.538** -0.073 0.049 0.098
Q7.EvaluateV Coefficient
nGreenFin Sig. (2-
. <.001 0.582 0.67 0.394
tailed)
Correlation
-.538** 1 -0.089 -0.128 -0.006
Q8.EvaluateGr Coefficient
eenFinCost Sig. (2-
<.001 . 0.483 0.243 0.958
tailed)
Correlation
-0.073 -0.089 1 0.09 -.230*
Kendall' Q9.EvaluateGr Coefficient
s tau_b eenFinProcess Sig. (2-
0.582 0.483 . 0.412 0.036
tailed)
Correlation
0.049 -0.128 0.09 1 0.078
Coefficient
STRAT
Sig. (2-
0.67 0.243 0.412 . 0.412
tailed)
Correlation
0.098 -0.006 -.230* 0.078 1
Coefficient
STAKE
Sig. (2-
0.394 0.958 0.036 0.412 .
tailed)

To examine possible relationship between variables, correlation matrix is obtained as shown in

Table 4.3. It could be seen that there exists a statistically significant negative correlation between
the perception of costs of green finance and the outlook on the use of green finance. It could be
understood that firms consider the cost of green finance to be the main aspect, as the higher the
cost of green finance incurred, the less potential as a source of finance that firms are more
willing to use. This result highly supports the trade-off theory by Modiglianni & Miller (1958),
showing that firms would choose a source of finance to maintain an optimal capital structure that
optimised the cost of finance, hence enhancing its profitability. The finding is also in line with
the findings by Vo (2017) that showed firms in Vietnam would choose its source of finance as
long as the capital structure they followed would optimise profitability and ensure the long-run
survivability.
On the other hand, other aspects such as the requirement criteria, firm’s strategic view or the
impact of stakeholders do not have any relationship with the use of green finance. This does not
fall in line with the original theory that suggested information requirement for access to finance
could impact their uses. In other words, small firms in Vietnam do not consider

3
 V. Conclusion

4
 VI. References

Climate Bond Initiative (2023) Interactive Data Platform. Available at:

https://www.climatebonds.net/market/data/

The World Bank (2023) Vietnam Macro Monitoring (English). Vietnam Macro Monitoring Washington,
D.C. : World Bank Group. Available at:
http://documents.worldbank.org/curated/en/099639309152339260/IDU032ac52da0ad18046010bbc9006f
7e8267ba2

Nguyen, H., Bui, N. Vo, D., McAleer, M. (2019) ‘Energy Consumption and Economic Growth: Evidence
from Vietnam’, Journal of Reviews on Global Economics, 8, pp. 350-361. Available at:
https://doi.org/10.6000/1929-7092.2019.08.30

International Energy Agency (2023) Data and Statistics. Available at: https://www.iea.org/data-and-
statistics

Nguyen, T.C., Chuc, A.T., Dang, L.N. (2018) ‘Green Finance In Viet Nam: Barriers and Solutions’,
ADBI Working Papers Series, 886.

Zimmer, A., Jakob, M., Steckel, J.C. (2015) ‘What motivates Vietnam to strive for a low-carbon
economy? — On the drivers of climate policy in a developing country’, Energy for Sustainable
Development, 24, pp. 19-23

Ozili, P.K (2022) ‘Green Finance Research Around the World: A Review of Literature’, International
Journal of Green Economics, Forthcoming , Available at: https://ssrn.com/abstract=4066900

Huang, Z., Liao, G., Li, Z. (2019) ‘Loaning scale and government subsidy for promoting green
innovation’, Technological Forecasting and Social Change, 144, pp, 148-156. Available at:
https://www.sciencedirect.com/science/article/pii/S0040162518311521

Lindenberg, N (2014) ‘Definition of Green Finance’, DIE mimeo. Available at:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2446496

Berrou, R., Ciampoli, N., Marini, V. (2019) ‘Defining Green Finance: Existing Standards and Main
Challenges’, The Rise of Green Finance in Europe, pp. 31-51. Available at:
https://link.springer.com/chapter/10.1007/978-3-030-22510-0_2

Weber, O., ElAlfy, A. (2019) ‘The Development of Green Finance by Sector’, The Rise of Green Finance
in Europe, pp. 53-78. Available at: https://link.springer.com/chapter/10.1007/978-3-030-22510-0_3

5
Sangiorgi, I., Schopohl, L. (2023) ‘Explaining green bond issuance using survey evidence: Beyond the

greenium’, The British Accounting Review, 55(1). Available at:

https://www.sciencedirect.com/science/article/pii/S0890838921000974

Vo, X.V. (2017) ‘Determinants of capital structure in emerging markets: Evidence from Vietnam’,

Research in International Business and Finance, 40, pp. 105-113. Available at:

https://www.sciencedirect.com/science/article/abs/pii/S0275531916302689?fr=RR-

2&ref=pdf_download&rr=801b0e3d88a57735

Frank, M.Z., Goyal, V.K. (2003) ‘Capital Structure Decisions: Which Factors Are Reliably Important?’,

Financial Management, 38(1), pp. 1-37. Available at: https://www.jstor.org/stable/20486683

Modigliani, F., Miller, M.H. (1958) ‘The Cost of Capital, Corporation Finance and the Theory of

Investment’, The American Economic Review, 48(3), pp. 261-297. Available at:

https://www.jstor.org/stable/1809766

Myers, S.C. (1984) ‘The Capital Structure Puzzle’, The Journal of Finance, 39(3), pp. 574-592. Available

at: https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1540-6261.1984.tb03646.x

Frimpong, I.A., Adeabah, D., Ofosu, D., Tenakwa, E.J. (2022) ‘A review of studies on green finance of
banks, research gap and future directions’, Journal of Sustainable Finance and Investment, 12(4), pp.
1241-1264. Available at:

6
APPENDIX

Appendix 1: Survey Questions

7
 Appendix 2: Survey responses regarding financing behaviour and perceptions on green finance

Panel A: Firm's financing behavior

Panel A consists of answers for the questions regarding the overall financing strategy behaviour of the respondents on the scale of importance and significance (1 is the lowest to 5 is
the highest). The questions in this panel covered (1) the preferred instruments to use when raising finance for new projects, (2) the respondent’s overall strategy when raising funds,
and (3) respondents’ incentives when raising finance.
These questions would lay the foundation for determining the fundraising strategy carried out by firms in Vietnam to learn about how firms selected their means for raising funds for
their investments and the drivers for such decisions. These questions were carried out without including green finance in the context so that there would be no interference from the
availability of green finance. The responds would then be cross-examined with other results for further discussion.
1. Preferred financial instruments when raising finance
Convertible
Internal equity External equity Direct debt Convertible debt Preferred share
preferred share
1 6 8 8 8 9 12
2 2 5 9 11 15 16
3 7 12 21 23 17 15
4 6 14 8 8 6 3
5 32 14 7 3 6 7

2. Firm's fundraising strategy

Find ways to maintain the target debt/equity The most accessible capital source will be
Balance between two strategies Other
ratio to optimize capital costs used before other sources are used
26 25 1 1

3. Drivers of firm's company/organization's financial decisions:

Level of
Maximize the price of Ensuring the long- Maintain Maintain high debt
Maintain financial Corporate depreciation and
publicly traded term survival of the comparability with ratings of credit
flexibility income tax rate non-debt tax
securities business industry peers institutions
shield
1 19 1 0 0 14 2 0
2 5 3 2 2 9 3 3
3 13 7 6 12 15 7 6
4 9 17 6 24 10 14 26
5 7 25 39 15 5 27 18

8
 Avoid diluting the Avoid
Expected cash
Risk of insolvency Risk of invested ownership rights of mispricing
Control voting rights flow/income from
leading to bankruptcy assets common upcoming
invested assets
shareholders securities

1 1 6 3 1 15 16
2 4 9 6 9 10 10
3 14 15 17 16 14 11
4 12 16 15 11 10 10
5 22 7 12 16 4 6

Panel B: Perception on green finance

Panel B consists of answers for the questions regarding the take on green finance of the respondents on the scale of importance and significance (1 is the lowest to 5 is the highest). The
questions in this panel covered (1) the significance of stakeholders as green finance providers. (2) firms’ perception on the cost and the process of applying for green finance in comparison
to that of traditional finance, and (3) what motivated and demotivated firms from using green finance, specifically green bonds and green loans.
While these questions focus largely on green finance wider context, certain questions were ask relating to green bonds and green loans as both of them are the dominant green finance
sources in Vietnam (Appendix….), so that respondents could be more specific about their answers.

1. Rating the role of green finance providers

International Financial Insurance

Government Commercial Bank Investment Bank NGO Green funds
Organisations companies
1 2 1 1 2 2 3 4
2 0 2 1 6 6 3 6
3 2 15 16 10 9 6 18
4 10 16 14 18 19 19 16
5 39 19 21 17 17 22 9
Average 4.58 3.94 4.00 3.79 3.81 4.02 3.38

2. Perception on cost of green finance compared to traditional finance

Equal 10

9
Higher 12
Lower 31

3. Process of applying for green finance compared to traditional finance

Do not know 6
Less complicated 14
More complicated 31
Other opinion 2

4. Incentives to issue green bonds/green loans:

Diversify
Reputation Change the business Pressure from current Bond market Government
Low cost financial
benefits model investors/shareholders signals regulation
sources
1 4 3 1 4 6 1 2
2 3 6 3 12 10 5 4
3 12 14 20 21 25 9 15
4 16 17 14 12 7 13 15
5 18 13 15 4 5 25 17
Average 3.77 3.58 3.74 3.00 2.91 4.06 3.77

Commitments to Expectations of Previous successful

To increase stock
limit climate potential operations of businesses
prices
change investors/shareholders in the same industry

1 4 2 9 4
2 8 10 13 7
3 15 23 21 15
4 9 8 6 18
5 17 10 4 9
Average 3.51 3.26 2.68 3.40

10
5. Disincentives to issue green bonds/green loans
Lack of awareness Lack of demand
Lack of suitable The market is not fully Difficulty paying
about green from Investor preference
projects developed bonds
financial tools stakeholders
1 6 5 4 3 5 8
2 2 5 6 7 7 6
3 15 8 13 10 24 18
4 9 13 19 13 9 14
5 21 22 11 20 8 7
Average 3.70 3.79 3.51 3.75 3.15 3.11

11