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The impact of governance and transparency on firm investment in Vietnam

Author

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  • Edmund Malesky
  • Neil McCulloch
  • Nguyen Duc Nhat

Abstract

type="main" xml:id="ecot12068-abs-0001"> A large literature asserts a causal relationship between the quality of economic governance and economic performance. However, attempts to establish such a link at an aggregate level have met with considerable methodological criticism. This paper seeks to overcome this limitation. We match a panel of Vietnamese enterprises from 2006 to 2010 with a unique panel dataset measuring sub-national economic governance to estimate a relationship between local governance and private investment. We do not find a significant relationship between investment and most traditional forms of governance. However, there is one important exception – transparency, especially the public posting of planning documents, is strongly associated with higher investment across a range of different specifications. Our results have significant implications for policy, given the prevailing theory that changes in the quality of local economic governance will spur improved economic performance.

Suggested Citation

  • Edmund Malesky & Neil McCulloch & Nguyen Duc Nhat, 2015. "The impact of governance and transparency on firm investment in Vietnam," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(4), pages 677-715, October.
    • Handle: RePEc:bla:etrans:v:23:y:2015:i:4:p:677-715
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    File URL: http://hdl.handle.net/10.1111/ecot.2015.23.issue-4
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    Cited by:

    1. Thi Xuan Thu Nguyen & Javier Revilla Diez, 2017. "Multinational enterprises and industrial spatial concentration patterns in the Red River Delta and Southeast Vietnam," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 101-138, July.
    2. Van Huong, Vu & Mai, Yong & Hau, Bui Duc & Cuong, Ly Kim & Van Dao, Le, 2023. "Do firm characteristics in their local context promote corporate ecological and social responsibility? Evidence from a multi-hierarchical analysis," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 722-743.
    3. Dinh Thanh, Su & Hart, Neil & Canh, Nguyen Phuc, 2020. "Public spending, public governance and economic growth at the Vietnamese provincial level: A disaggregate analysis," Economic Systems, Elsevier, vol. 44(4).
    4. Quynh Trang Phan & Poomthan Rangkakulnuwat, 2022. "How price informativeness affects the sensitivity of investment-to-stock price in Vietnamese listed firms," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 12(1), pages 28-61.
    5. Van Bon Nguyen, 2021. "The relationship between FDI inflows and private investment in Vietnam: Does institutional environment matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1151-1162, January.
    6. Bach Nguyen & Hoa Do & Chau Le, 2022. "How much state ownership do hybrid firms need for better performance?," Small Business Economics, Springer, vol. 59(3), pages 845-871, October.
    7. Quang Minh Nguyen, 2023. "Impact of privatization on firm performance in Vietnam: A Staggered Difference-in-Differences analysis with heterogeneous treatment effects," Documentos de Trabajo EH-Valencia (DT-EHV) 2303, Economic History group at the Universitat de Valencia.
    8. Le, Manh-Duc & Pieri, Fabio & Zaninotto, Enrico, 2019. "From central planning towards a market economy: The role of ownership and competition in Vietnamese firms’ productivity," Journal of Comparative Economics, Elsevier, vol. 47(3), pages 693-716.
    9. Fransiskus Xaverius Lara Aba, 2021. "Institutional Change and Macroeconomic Variables in the ASEAN—Indonesia, Vietnam, and Cambodia: The Effects of a Trade War between China and USA," Economies, MDPI, vol. 9(4), pages 1-21, December.
    10. Tran, Hien Thu, 2019. "Institutional quality and market selection in the transition to market economy," Journal of Business Venturing, Elsevier, vol. 34(5), pages 1-1.
    11. Yu Ri KIM & TODO Yasuyuki, 2019. "Are Politically Connected Firms More Likely to Export?," Discussion papers 19049, Research Institute of Economy, Trade and Industry (RIETI).
    12. Berkel, Hanna & Estmann, Christian & Rand, John, 2022. "Local governance quality and law compliance: The case of Mozambican firms," World Development, Elsevier, vol. 157(C).

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