THE IMPACT OF GOVERNMENT SUPPORT ON FIRM PERFORMANCE IN VIETNAM: NEW EVIDENCE FROM A DYNAMIC APPROACH
Main Article Content
Abstract
Using a sample of private manufacturing small- and medium-sized enterprises (SMEs) in the period 2007–2015, this paper examines the effect of government support on firms’ financial performance in Vietnam. Contrary to many previous studies, the study finds that government assistance affects firms’ financial performance after controlling for heterogeneity, unobservable factors, and dynamic endogeneity. The finding supports the viewpoint of institutional theory. The study also reveals that assistance measures, such as tax exemptions, soft loans, and investment incentives to promote financial performance, are vital for the development of Vietnamese private SMEs.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Anh, N.N., Mai, N.P., Nhat, N.D., & Chuc, N.D. (2011). Trade liberalization and innovation linkages: Micro-evidence from Vietnam SME surveys. Retrieved 5 January 2018 from http://www.eria.org/publications/research_project_reports/images/pdf/y2010/no4/All_Pages_Micro_data_Y2010.pdf
Adams, R.B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291–309. https://doi.org/10.1016/j.jfineco.2008.10.007
Barajas, A., Huergo, E., & Moreno, L. (2017). Public support to business R&D and the economic crisis: Spanish evidence. Retrieved 10 February 2018 from https://mpra.ub.uni-muenchen.de/81529/
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
CIEM (Central Institute for Economic Management). (2010). Characteristics of the Vietnamese business environment: Evidence from a SME survey in 2009. Hanoi: CIEM.
Cuong, T.T., Rand, J., Silva, P., Tam, N.T., & Tarp, F. (2008). Dac diem moi truong kinh doanh o Vietnam/Characteristics of the Vietnamese business environment: Evidence from a SME survey in 2007. Hanoi: CIEM.
Cowling, M. (2010). The role of loan guarantee schemes in alleviating credit rationing in the UK. Journal of Financial Stability, 6(1), 36–44. https://doi.org/10.1016/j.jfs.2009.05.007
Doh, S., & Kim, B. (2014). Government support for SME innovations in the regional industries: The case of government financial support program in South Korea. Research Policy, 43(9), 1557–1569. https://doi.org/10.1016/j.respol.2014.05.001
Fajnzylber, P., Maloney, W.F., & Montes-Rojas, G.V. (2009). Releasing constraints to growth or pushing on a string? Policies and performance of Mexican microfirms. The Journal of Development Studies, 45(7), 1027–1047. https://doi.org/10.1080/00220380802264911
Flannery, M.J., & Hankins, K.W. (2013). Estimating dynamic panel models in corporate finance. Journal of Corporate Finance, 19, 1–19. https://doi.org/10.1016/j.jcorpfin.2012.09.004
González, V.M. (2013). Leverage and corporate performance: International evidence. International Review of Economics & Finance, 25, 169–184. https://doi.org/10.1016/j.iref.2012.07.005
Hansen, H., Rand, J., & Tarp, F. (2009). Enterprise growth and survival in Vietnam: Does government support matter? The Journal of Development Studies, 45(7), 1048–1069. https://doi.org/10.1080/00220380902811025
Honjo, Y., & Harada, N. (2006). SME policy, financial structure and firm growth: Evidence from Japan. Small Business Economics, 27(4–5), 289–300. https://doi.org/10.1007/s11187-005-6703-0
Le, C.L.V. (2010). Technical efficiency performance of Vietnamese manufacturing small and medium enterprises. Unpublished PhD dissertation, University of Wollongong, NSW, Australia.
Lerner, J. (1999). The government as venture capitalist: The long-run impact of the SBIR program. Journal of Business, 3(72), 285–318. https://doi.org/10.1086/209616
Li, H., Meng, L., Wang, Q., & Zhou, L.A. (2008). Political connections, financing and firm performance: Evidence from Chinese private firms. Journal of Development Economics, 87(2), 283–299. https://doi.org/10.1016/j.jdeveco.2007.03.001
Loayza, N.V. (1997). The economics of the informal sector: A simple model and some empirical evidence from Latin America. Policy Research Working Paper WPS 1727. Washington, DC: The World Bank. Retrieved 15 February 2018 from http://documents.worldbank.org/curated/en/685181468743710751/Theeconomics-of-the-informal-sector-a-simple-model-and-some-empiricalevidence-from-Latin-America
Maggioni, V., Sorrentino, M., & Williams, M. (1999). Mixed consequences of government aid for new venture creation: Evidence from Italy. Journal of Management and Governance, 3(3), 287–305. https://doi.org/10.1023/A:1009922725925
Morris, M., & Stevens, P. (2010). Evaluation of a New Zealand business support programme using firm performance micro-data. Small Enterprise Research, 17(1), 30–42. https://doi.org/10.5172/ser.17.1.30
Nguyen, T.T., & Van Dijk, M.A. (2012). Corruption, growth, and governance: Private vs. state-owned firms in Vietnam. Journal of Banking & Finance, 36(11), 2935–2948. https://doi.org/10.1016/j.jbankfin.2012.03.027
Rand, J., & Torm, N. (2012). The benefits of formalization: Evidence from Vietnamese manufacturing SMEs. World Development, 40(5), 983–998. https://doi.org/10.1016/j.worlddev.2011.09.004
Rotger, G.P., Gørtz, M., & Storey, D.J. (2012). Assessing the effectiveness of guided preparation for new venture creation and performance: Theory and practice. Journal of Business Venturing, 27(4), 506–521. https://doi.org/10.1016/j.jbusvent.2012.01.003
Schultz, E.L., Tan, D.T., & Walsh, K.D. (2010). Endogeneity and the corporate governanceperformance relation. Australian Journal of Management, 35(2), 145–163. https://doi.org/10.1177/0312896210370079
Takalo, T., & Tanayama, T. (2010). Adverse selection and financing of innovation: Is there a need for R&D subsidies? The Journal of Technology Transfer, 35(1), 16–41. https://doi.org/10.1007/s10961-009-9112-8
Vu, H.V., Holmes, M., Tran, T.Q., & Lim, S. (2016). Firm exporting and productivity: What if productivity is no longer a black box. Baltic Journal of Economics, 16(2), 95–113. https://doi.org/10.1080/1406099X.2016.1187382
Vu, H.V., Tran, T.Q., Nguyen, T.V., & Lim, S. (2018). Corruption, types of corruption and firm financial performance: New evidence from a transitional economy. Journal of Business Ethics, 148(4), 847–858. https://doi.org/10.1007/s10551-016-3016-y
Vu, H., Holmes, M., Lim, S., & Tran, T. (2014). Exports and profitability: A note from quantile regression approach. Applied Economics Letters, 21(6), 442–445. https://doi.org/10.1080/13504851.2013.866197
Wei, J., & Liu, Y. (2015). Government support and firm innovation performance: Empirical analysis of 343 innovative enterprises in China. Chinese Management Studies, 9(1), 38–55. https://doi.org/10.1108/CMS-01-2015-0018
Wintoki, M.B., Linck, J.S., & Netter, J.M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105(3), 581–606. https://doi.org/10.1016/j.jfineco.2012.03.005
Wong, W.-Y., & Hooy, C.-W. (2018). Do types of political connection affect firm performance differently? Pacific-Basin Finance Journal, 51, 297–317. https://doi.org/10.1016/j.pacfin.2018.08.009
Wooldridge, J.M. (2009). Introductory econometrics: A modern approach. Mason, OH: Cengage Learning.
World Bank. (2012). Well begun, not yet done: Vietnam’s remarkable progress on poverty reduction and the emerging challenges. Retrieved 6 February 2018 from http://www.ngocentre.org.vn/files/downloads/Jobs/About%20Us/Resources/Conference/24_aug_2012_pa2_full_report_7172012.pdf
Wu, A. (2017). The signal effect of government R&D subsidies in China: Do ownership matter? Technological Forecasting and Social Change, 117(C), 339–345.
Zhang, H., Li, L., Zhou, D., & Zhou, P. (2014). Political connections, government subsidies and firm financial performance: Evidence from renewable energy manufacturing in China. Renewable Energy, 63, 330–336. https://doi.org/10.1016/j.renene.2013.09.029
Zhou, Q., Faff, R., & Alpert, K. (2014). Bias correction in the estimation of dynamic panel models in corporate finance. Journal of Corporate Finance, 25, 494–513. https://doi.org/10.1016/j.jcorpfin.2014.01.009