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Investment Financing and Financial Development: Firm Level Evidence from Vietnam

Conor M. O'Toole a,b,c
Carol Newman a
aDepartment of Economics, Trinity College Dublin, College Green, Dublin 2, Ireland
bDepartment of Agricultural Economics and Farm Surveys, Teagasc, Athenry, Co. Galway, Ireland
cEconomic Analysis Division, Economic and Social Research Institute, Whitaker Square, Sir John Rogerson's Quay, Dublin 2, Ireland

IIIS Discussion Paper No. 409


We explore whether nancial development reduces external investment nancing constraints for rms. Within-country provincial measures of nancial development are linked to investment using data from the Vietnamese enterprise survey (VES). We focus on three main aspects of nancial development: nancial sector depth, state interventionism in nance, and the degree of market driven nancing in the economy. We nd that nancial development reduces investment nancing constraints. Constraints are decreasing in credit to the private sector, increasing in the use of nance by state-owned enterprises and decreasing in the degree to which nance is allocated on commercial market terms.

Keywords: Financial development, Financing constraints, Investment
JEL codes: G31; G32; O16

Last updated 28 August 2014 by IIIS (Email).