Investment behavior of MSMEs during the downturn periods: Empirical evidence from Vietnam

This paper analyzes panel data of micro, small, and medium-sized enterprises (MSMEs) in Vietnam, covering five two-year periods from 2003 to 2012, in order to understand how MSMEs' investments in their own productive fixed assets and in other firms' equities and real estate increased or decreased after the global financial crisis of 2007–08. It finds that MSMEs increased investments in other firms and real estates and reduced investments in their own businesses considerably after the crisis. This, along with the study's other findings, suggests that the global financial crisis marked the beginning of resource reallocation from hitherto proliferating MSMEs to rapid growth of larger firms in the Vietnamese economy.
Highlights • This paper examines the investment behavior of MSMEs in emerging economies such as that in Vietnam. • The productive investment rate is significantly lower during periods of downturn. • MSMEs increased non-productive investments after the global financial crisis. • There exists heterogeneity in investment behavior by firm characteristics. • Downturn periods possibly marked the beginning of resource reallocation among firms.