Government Support and Firm Profitability in Vietnam

Abstract

<jats:p>Existing studies on the linkage between government subsidies and firm financial performance often use a mean regression approach and focus mainly on developed countries. To fill the gap, this study, for the first time, considers the impact of government support activities on the profitability of manufacturing SMEs in a developing country, Vietnam. Using an unbalanced panel dataset covering the period 2009–2015, government financial supports show an insignificant linkage with firm profitability when using OLS. However, a fixed‑effect quantile approach reveals that government financial support is negatively related for firms with low profit but is positively related for firms in the high profitability percentile. Our findings also suggest that policymakers should focus on helping start‑ups instead of ineffective, informal firms.</jats:p>

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

“…By contrast, poor working capital management is one of the main reasons that make the business fail. More recent evidence, Nguyen, Tran and Do (2018) examined the relationship between types of government support and profitability of SMEs in Vietnam. By using the fixed-effect quantile regression method, they claimed that the government financial support has a negative impact on the SMEs profitability in low quantile, but positive with the high one.…”