Organisational Quality and SME Financing: A Latent-Construct Approach to Access to Finance and Firm Performance

Information asymmetry remains a fundamental constraint on the allocation of external finance, as the organisational capabilities and internal quality of firms cannot be fully observed by external financiers. Although managerial quality, human capital, innovation, digitalisation, relational networks and financial transparency have each been linked to financing outcomes, their interrelated nature has received considerably less attention. To address this gap, a unified theoretical framework is developed in which these observable organisational attributes are conceptualised as indicators of a latent construct, termed Organisational Quality (OQ). Drawing on information asymmetry theory and signalling theory, the framework is tested using longitudinal data from 2,017 Vietnamese manufacturing small and medium-sized enterprises (SMEs), comprising 6,051 firm-year observations from the SMEs Survey. OQ is operationalised as a reflective latent construct within a structural equation modelling (SEM) framework, through which its associations with access to external finance, productive investment and firm performance are examined. Strong empirical support is obtained for the proposed framework. Higher OQ is found to be positively associated with access to external finance, and this association is significantly stronger under conditions of greater information asymmetry. Access to external finance is, in turn, positively associated with productive investment, while productive investment is positively associated with firm performance. The mediation results further indicate that OQ is associated with firm performance through both direct and indirect pathways, with a sequential pathway operating through improved access to external finance and subsequent productive investment. These relationships remain stable across alternative measurement approaches, model specifications and measures of firm performance. The findings provide three principal contributions. First, organisational characteristics that have traditionally been examined separately are integrated into a common latent organisational dimension. Second, OQ is operationalised and empirically validated as a reflective latent construct within an integrated SEM framework. Third, evidence is provided that OQ is associated with improved access to external finance, greater productive investment and enhanced firm performance, while its financing-related association becomes more pronounced as information asymmetry increases.