THE EFFECT OF FINANCIAL DEVELOPMENT ON FIRM INVESTMENT: AN EVIDENCE FROM VIETNAM

Abstract

This paper investigates whether and how financial development affects firm investment in Vietnam. Using a dataset of 569 Vietnamese firms from 2000 to 2015, the authors document two key findings. First, financial development is positively associated with the firm investment. Second, when adding interaction terms between firm-level characteristics (cashflow, debt) and financial development indicators, the results suggest that the financial system is more developed, the firms take more great opportunities to access external funds for investment, reducre their dependence on internal sources of funding.

Keywords: firm investment, financial system, Vietnam.