Financial Constraints and Firm Productivity in Vietnamese Manufacturing Industries

ABSTRACT Financial constraint is detrimental to firm productivity but has been less explored in the literature. In this empirical study, I fill this gap by using a rich Vietnamese firm-level dataset for manufacturing firms over the period of 2010 to 2015 to estimate a total factor productivity (TFP) model augmented with financial factors. The estimation results indicate that sufficient internal financing and the development of the financial sector boost firm productivity, whereas the leverage ratio has a negative impact on firm productivity. I also provide the heterogeneous impact of financial development on firm productivity across different firm sizes as well as different trade modes.