The impact of bank-firm relationship on the performance of listed companies on the Vietnam stock market

This research examines the influence of the bank-firm relationship on the financial performance of non-financial firms listed on the Ho Chi Minh City Stock Exchange (HOSE) over the period 2017-2022. Utilizing panel data and employing the Feasible Generalized Least Squares (FGLS) regression model, the findings reveal that a stronger relationship between firms and banks has a statistically significant and positive influence on firm performance. Such relationships facilitate better access to bank financing, reduce borrowing costs, and offer more favorable credit terms. The positive effect is even more pronounced among large-scale firms and those with higher investment ratios, who typically rely more heavily on external capital to finance growth and innovation. However, the study also uncovers a potential downside: overexpansion in bank relationships may increase transaction and coordination costs, thereby negatively affecting firm efficiency. This suggests that firms should focus on optimizing—not merely increasing—the number and quality of banking relationships. Based on these empirical findings, the study recommends that firms develop long-term, trust-based partnerships with banks, maintain transparent financial reporting, and enhance investment capabilities to fully leverage credit advantages. Additionally, the research offers insights for banks and policymakers in designing more effective relationship-lending mechanisms that balance financial inclusion and credit risk, especially in an emerging economy like Vietnam. The study contributes to the growing body of literature on social capital in corporate finance and underscores the dual role of banks not only as capital providers but also as strategic partners in firm development.