External publications

Local financial development and the growth of small firms in Vietnam

Tran, Viet T. / Yabibal M. Walle / Helmut Herwartz / Trung Thanh Nguyen
External Publications (2022)

in: Journal of the Asia Pacific Economy 29 (3), 1564-1598

DOI: https://doi.org/10.1080/13547860.2022.2109379
Information

This paper examines whether heterogeneities in financial development among Vietnamese provinces matter for firm growth in Vietnam. Using a nationally representative firm survey that covers more than 41,000 firms for the period 2009 − 2013, we estimate the impact of provincial financial development on the growth rates of firms by accounting for sectoral differences in growth opportunities. We find that province-level financial development promotes the growth rates of sales, investment and sales per worker of small firms, and reduces the growth rate of the wage-to-sales ratio. Our results imply that firms grow faster in provinces with a higher level of financial development. Moreover, the effect of financial development on growth rates is larger when firms operate in sectors with better growth opportunities.