FACTORS AFFECTING PERFORMANCE OF SMALL AND MEDIUM-SIZED ENTERPRISES IN VIETNAM

Abstract

The paper aims to determine the factors affecting the performance of Vietnam’s small and medium-sized enterprises (SMEs) in the Ho Chi Minh City area from 2009 to 2019. The authors examine seven statistically significant variables that positively affect SMEs' performance at 5% by using the quantitative method (ordinary least squares regression model - pooled OLS, fixed effect model, random effect model, and generalized least squares). These variables are as follows: firm age, firm size, leverage ratio, revenue growth, gross domestic product (GDP) growth, inflation rate, and quality of local governance. Moreover, the study also applies the trade-off theory, SMEs using the out resources from banks and other outsiders lead to efficient firm performance such as revenue growth and using higher financial leverage will result in higher firm performance including saving up on taxes and improved business efficiency. Furthermore, there is the existence of homoscedasticity and no-autocorrelation in the model when using generalized least squares. These tests confirm that the model estimation is both unbiased and reliable. One of the most significant contributions of this study to the existing literature on the subject is the confirmation that macroeconomic and firm-specific variables affect the performance of SMEs. The results are highly variable from an econometric standpoint, both, in the long and short run.