Financial Health and Firm Productivity: Firm-Level Evidence from Viet Nam

This paper empirically investigates whether financial health shores up firm productivity. It presents productivity as another driving factor in translating financial development into real economic progress. The authors’ empirical framework employs Levinsohn and Petrin’s (2003) semi-parametric estimation of total factor productivity (TFP) using firm-level panel data during 2002-2008, and incorporates financial health variables into conventional determinants of firm productivity. The findings suggest that liquidity and access to external credit boosts firm productivity, with the latter particularly imperative for exporting and/or importing firms.