Does the registration reform doubly welcome registered firms to formal financial markets?

This paper studies the effect of the Vietnamese business registration reform on the relative use of formal and/or informal financing of micro-manufacturers for the period 2005-2015. The difference-in-differences estimations identify the heterogeneity of the associated impact by firm age and local governance quality. The reform increased the propensity to use formal finance only for mature, registered firms under strong local governance. By contrast, the reform had no impacts on formal finance of young, registered counterparts. These young firms, particularly those located in strong local governance, relied more on informal finance only after their registration. These findings question whether access to formal financing is an ostensible benefit of registration for young firms and whether the registration reform in the real sector could provide an additional impetus for more flexibility in formal financial markets.