The impact of local financial development on firm growth in Vietnam: does the level of corruption matter?

Tran, Viet T. / Yabibal M. Walle / Helmut Herwartz
Externe Publikationen (2020)

in: European Journal of Political Economy 62, article 101858

DOI: 10.1016/j.ejpoleco.2020.101858

We examine the effects of province-level financial development and corruption on the performance of Vietnamese firms in terms of the growth rates of sales, investment and sales per worker. Employing a large firm-level dataset of more than 40,000 firms for the period 2009–2013 and applying a heteroskedasticity-based identification strategy, we find that province-level financial development promotes firm growth, while corruption hinders it. Most importantly, the marginal effect of financial development on firm growth depends negatively on the level of corruption. Moreover, financial development exacerbates the growth-retarding effect of corruption.

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