Local financial development and the growth of small firms in Vietnam

Viet T. Tran, Yabibal Walle, Helmut Herwartz and Trung Thanh Nguyen

Journal of the Asia Pacific Economy, 2024, vol. 29, issue 3, 1564-1598

Abstract: 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.

Date: 2024
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DOI: 10.1080/13547860.2022.2109379

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