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Investment Financing and Financial Development: Firm Level Evidence from Vietnam

  • Conor O'Toole

    ()

    (Department of Economics, Trinity College Dublin; Department of Agricultural Economics and Farm Surveys, Teagasc; Economic Analysis Division, Economic and Social Research Institute, Ireland)

  • Carol Newman

    ()

    (Department of Economics and Institute for International Integration Studies, Trinity College Dublin)

We explore whether financial development reduces external investment financing constraints for firms. Within-country provincial measures of financial development are linked to investment usingdata from the Vietnamese enterprise survey (VES). We focus on three main aspects of financialdevelopment: financial sector depth, state interventionism in finance, and the degree of marketdriven financing in the economy. We find that financial development reduces investment financing constraints. Constraints are decreasing in credit to the private sector, increasing in the use of finance by state-owned enterprises and decreasing in the degree to which finance is allocated on commercial market terms.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp409.

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Length: 68 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iis:dispap:iiisdp409
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