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Local financial development and the growth of small firms in Vietnam

Author

Listed:
  • Viet T. Tran
  • Yabibal M. Walle
  • Helmut Herwartz
  • Trung Thanh Nguyen

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.

Suggested Citation

  • Viet T. Tran & Yabibal M. Walle & Helmut Herwartz & Trung Thanh Nguyen, 2024. "Local financial development and the growth of small firms in Vietnam," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 29(3), pages 1564-1598, July.
    • Handle: RePEc:taf:rjapxx:v:29:y:2024:i:3:p:1564-1598
    DOI: 10.1080/13547860.2022.2109379
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