Heterogeneous Effects of Credit Access on Formal and Informal Firm Growth: Empirical Evidence From Vietnam

This paper examines the causal effect of credit access on firm growth (measured by employment growth), using a unique micro-, small-, and medium-sized firm-level data collected every two years in Vietnam from 2005 to 2013. The results obtained from fixed-effects (FE) and FE with instrumental variable estimators show that firms with credit access experience a higher growth than firms without credit access. We also find that access to credit is positively associated with both formal and informal firm growth, but the results for formal firms seem to be driven by some high growth firms (and rapidly shrinking firms). The effect of credit access on firm growth is also heterogeneous by firm size and firm age in both types of firms.