International Journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN: 2313-626X

Frequency: 12
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 Volume 8, Issue 3 (March 2021), Pages: 63-70

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 Original Research Paper

 Title: Formality and investments: Evidence of Vietnamese SMEs

 Author(s): Hong Mai Phan 1, *, Phan Thi Thu Hien 2

 Affiliation(s):

 1School of Banking and Finance, National Economics University, Hanoi, Vietnam
 2Faculty of Investment, National Economics University, Hanoi, Vietnam

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 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0002-6280-6873

 Digital Object Identifier: 

 https://doi.org/10.21833/ijaas.2021.03.009

 Abstract:

Business formality is considered a key driver in the development of the private sector in developing countries, which can contribute to enhancing the capacity and competitiveness of firms. The purpose of this paper is to investigate the impact of formality on investments of small and medium-sized enterprises (SMEs) in Vietnam. Different from previous work, we apply a two-stage method with random-effects Probit and Tobit regressions to control for endogeneity surrounding formality and investments. Results show that formality measured by having a tax code fosters all types of investments. However, formality proxied by having a full set of business registration documents decreases total and fixed investments but increases non-fixed investments. Our findings suggest that relaxing complex procedures, enhancing the knowledge of the owner, and improving the ease of doing business play a crucial role in the formalization of Vietnamese SMEs. 

 © 2021 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords: Business registration, Formality, Investments, SMEs, Vietnam

 Article History: Received 6 September 2020, Received in revised form 22 November 2020, Accepted 24 November 2020

 Acknowledgment:

No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

  Phan HM and Hien PTT (2021). Formality and investments: Evidence of Vietnamese SMEs. International Journal of Advanced and Applied Sciences, 8(3): 63-70

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 Tables

 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 

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