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Government Support and Firm Profitability in Vietnam

Author

Listed:
  • Nguyen Thanh Minh

    (Ph.D., Faculty of Accounting, Academy of Finance; Hanoi, Vietnam)

  • Tran Tuyen Quang

    (Ph.D., Center for Data and Socio-Economic Analysis, University of Economics and Business, Vietnam National University, Hanoi, Vietnam, e-mail: tuyentq@vnu.edu.vn)

  • Do Long Thanh

    (The Office of National Science and Technology Programs, Ministry of Science and Technology; Hanoi, Vietnam)

Abstract

Existing studies on the linkage between government subsidies and firm financial performance often use a mean regression approach and focus mainly on developed countries. To fill the gap, this study, for the first time, considers the impact of government support activities on the profitability of manufacturing SMEs in a developing country, Vietnam. Using an unbalanced panel dataset covering the period 2009–2015, government financial supports show an insignificant linkage with firm profitability when using OLS. However, a fixed-effect quantile approach reveals that government financial support is negatively related for firms with low profit but is positively related for firms in the high profitability percentile. Our findings also suggest that policymakers should focus on helping start-ups instead of ineffective, informal firms.

Suggested Citation

  • Nguyen Thanh Minh & Tran Tuyen Quang & Do Long Thanh, 2018. "Government Support and Firm Profitability in Vietnam," Comparative Economic Research, Sciendo, vol. 21(4), pages 105-120, December.
    • Handle: RePEc:vrs:coecre:v:21:y:2018:i:4:p:105-120:n:6
    DOI: 10.2478/cer-2018-0029
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    Citations

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    Cited by:

    1. Duong Phuong Thao Pham & Thi Cam Ha Huynh, 2020. "The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(4), pages 775-796.

    More about this item

    Keywords

    government support; profitability; quantile approach; SMEs;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing

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