MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIET NAM HO CHI MINH UNIVERSITY OF BANKING ------------------------------------------------- GRADUATION THESIS THE IMPACT OF OWNERSHIP STRUCTURE ON VIETNAMESE COMMERCIAL BANKS’ PROFITABILITY MAJOR: FINANCE – BANKING NUMBER CODE: 7 34 02 01 NGUYEN THI BICH GIANG HO CHI MINH CITY – SEPTEMBER 2024 MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIET NAM HO CHI MINH UNIVERSITY OF BANKING ------------------------------------------------- GRADUATION THESIS THE IMPACT OF OWNERSHIP STRUCTURE ON VIETNAMESE COMMERCIAL BANKS’ PROFITABILITY MAJOR: FINANCE – BANKING NUMBER CODE: 7 34 02 01 Name: NGUYEN THI BICH GIANG Student Code: 050608200313 Class: HQ8 – GE17 ACADEMIC ADVISOR PhD. DUONG THI THUY AN HO CHI MINH CITY – SEPTEMBER 2024 i LETTER OF GUARANTEE I hereby guarantee that the thesis "The Impact of Ownership Structure on Vietnamese Commercial Banks’ Profitability " is my own research, conducted under the scientific guidance of PhD. Duong Thi Thuy An The data presented in the thesis is truthful and has not been published in any other thesis. Ho Chi Minh City, September 2024 Author ii ACKNOWLEDGMENTS First and foremost, I would like to express my sincere gratitude to all the faculty members at the University of Banking Ho Chi Minh City who have imparted their knowledge to me throughout my four years of study.
In particular, I am deeply indebted to Ms. Duong Thi Thuy An for her invaluable guidance and constructive feedback throughout my research process. Her insightful comments and suggestions helped me identify and rectify numerous shortcomings and inaccuracies in my work, allowing me to refine my dissertation and achieve a more comprehensive and accurate representation of my research findings. I am truly grateful for her dedication and support, which played a pivotal role in enabling me to complete my dissertation to the best of my abilities.
I would also like to extend my heartfelt gratitude to my fellow classmates and friends for their unwavering support and encouragement throughout my academic journey. Their camaraderie and friendship have been a source of strength and motivation, and I am incredibly fortunate to have shared this experience with them. Finally, I am immensely grateful for the opportunity to have studied at the University of Banking Ho Chi Minh City. The university's rigorous academic environment and commitment to excellence have provided me with the necessary skills and knowledge to pursue a successful career in finance.
I am proud to be an alumnus of this esteemed institution and will always cherish the memories and experiences I have gained here. I hope that my dissertation will make a meaningful contribution to the field of finance and provide valuable insights to stakeholders in this important sector. Once again, I express my deepest gratitude to all those who have supported me along the way. Your guidance, encouragement, and friendship have been instrumental in my success.
Best regard, Ho Chi Minh City, April 2024 Author iii ABSTRACT Title: The Impact of Ownership Structure on Vietnamese Commercial Banks’ Profitability The dissertation focuses on assesing the impact of ownership structure consist of 3 component: state ownership (SO), foreign ownership (FO) and concentrated ownership (CO) Vietnamese Commercial Banks’ Profitability. Empirical model estimated for a sample of 26 Vietnamese listed joint stock banks in the period of 2015 – 2023, including 234 observations to assess ROAA model. The empirical findings indicate that state ownership and foreign ownership have a positive influence on bank performance, as measured by ROAA. In contrast, concentrated ownership has a negative effect.
While bank size exhibits a negative correlation with ROAA, this relationship is not statistically significant. A higher non-performing loan ratio is negatively associated with ROAA, reflecting the need for increased loan loss provisions. Moreover, the cost-to-income ratio also has a negative impact on ROAA, highlighting the importance of cost efficiency. Keywords: Ownership struture, profitability, commerical banks iv TABLE OF CONTENT LETTER OF GUARANTEE.
iii TABLE OF CONTENT. iv LIST OF TABLES AND FIGURES. viii LIST OF ABBREVIATIONS. MOTIVATION OF RESEARCH.
GAP OF RESEARCH AND CONTRIBUTIONS. OBJECTIVES OF RESEARCH. QUESTIONS OF RESEARCH. SUBJECTS AND SCOPE OF RESEARCH.
METHODOLOGY OF RESEARCH. STRUCTURE OF RESEARCH. 5 SUMMARY OF CHAPTER 1. THEORETICAL BACKGROUND AND RELATED RESEARCH.
OWNERSHIP STRUCTURE AND PROFITABILITY. 8 The definition of commercial bank. 8 Concept of ownership structure. 8 v Concept of profitability.
THE THEORETICAL FRAMEWORK. 10 The Agency Theory. EMPIRICAL LITERATURE REVIEW. 14 SUMMARY OF CHAPTER 2.
METHODOLOGY OF THESIS. VARIABLE DESCRIPTION AND DEVELOP RESEARCH HYPOTHESES. DATA OF THESIS. METHOD AND DATA ANALYSIS.
Correlation matrix analysis. Model evaluation and selection. Surmounting of defect in the model. 34 Summary of the research data analysis process.
35 SUMMARY OF CHAPTER 3. THE RESEARCH RESULTS. DESCRIPTIVE STATISTIC ANALYSIS. MULTICOLLINEARTY TEST THROUGH THE VIF COEFFICIENT.
THE RESULT OF ESTIMATED MODEL. 41 Choosing between Pooled OLS and FEM. 43 Comparison of FEM and REM. TESTING THE DEFECTS OF THE REM MODEL.
RESULT OF FGLS. Surmounting of defect in the GMM Model. 46 Result of GMM. COMPARISON WITH PREVIOUS RESEARCH.
52 SUMMARY OF CHAPTER 4. CONCLUSIONS AND RECOMMENDATIONS. OVERVIEW OF RESEARCH. RECOMMENDATIONS FROM RESEARCH RESULTS.
57 Recommendations for the ownership structure. 57 Recommendations for the non – performing loan. 58 Recommendations for the cost to income ratio. LIMITATIONS AND FUTURE RESEARCH DIRECTIONS.
59 Limitations of the research. 59 vii Future research directions. 60 SUMMARY OF CHAPTER 5. 69 viii LIST OF TABLES AND FIGURES TABLES Table 2.
Empirical literature review. Descriptive statistic analysis. Regression result using Pooled OLS, FEM, and REM. F-test results for Pooled OLS and FEM models.
Hausman test results. Comparison with previous research. Research data analysis process. Research data analysis process.
FGLS model results summary. FGLS model results summary. 50 ix LIST OF ABBREVIATIONS Abbreviations Definition ROAA Return on Average Assets ROAE Return on Average Equity NIM Net Interest Margin SO State Ownership DO Domestic Ownership FO Foreign Ownership CO Concentrated Ownership CAR Capital Adequacy Ratio LDR Loan to Reposit Ratio CIR Cost to Income Ratio NPL Non - performing Loan SIZE Bank size Pooled OLS Pooled Ordinary Least Squares FEM Fixed Effects Model REM Random Effects Model FGLS Feasible Generalized Least Squares GMM Generalized Method of Moments HOSE Ho Chi Minh Stock Exchange HXN Hanoi Stock Exchange UPCOM Unlisted Public Companies Market PVF Petro Vietnam Finance Joint Stock Corporation EVF EVN Finance Joint Stock Company CASA Current Account Savings Account WTO World Trade Organization CBs Commercial Banks FDI Foreign Direct Investment 1 CHAPTER 1. INTRODUCTION This chapter presents the research topic.
It covers: the rationale and significance of the study, research objectives, research questions, scope and limitations, research methodology, contributions, and the thesis structure. MOTIVATION OF RESEARCH The relationship between ownership structure and bank performance has been a topic of debate in every nation. High levels of shareholder equity are believed to incentivize owners to monitor managerial decisions more closely. This issue has been explored through numerous empirical studies across various industries, with a particular focus on banks.
As Vietnam, a developing country, progresses towards global integration by being a member of World Trade Organization (WTO) since 2007, its banking sector needs to adapt its management style to the current context. This is why the author has chosen this specific topic for investigation: Firstly, The Prime Minister's Decision approving the Project "Restructuring the credit institution system and handling bad debts in the period 2021 - 2025" includes an objective to prevent cross-ownership, mutual ownership, and controlling ownership that could manipulate related credit institutions. Secondly, the prevalent issue of cross - ownership 1 poses significant challenges to the Vietnamese banking system (Nguyen Thanh Duong anh Le Van Chi, 2014). Following the recent Van Thinh Phat Group2, Vietnamese regulators have underscored the pressing need to strengthen cross - ownership regulations, bank 1 Article 16(2) of Decree No.
96/2015/NĐ-CP guiding the Enterprise Law defines "cross-ownership" as the situation where two enterprises simultaneously own shares or contributed capital in each other. 2 The Van Thinh Phat ecosystem encompasses three sub-ecosystems: Ecosystem 1: Van Thinh Phat Corporation (the parent company) – Mrs. Truong My Lan owns 99,99% of the shares through subsidiaries and individuals in name; other individuals own 0,01% of the shares and subsidiaries – has over 100 subsidiaries operating in various fields, primarily banking, finance, real estate, securities, etc. Ecosystem 2: Saigon Commercial Bank (SCB) consists of Van Thinh Phat Investment Joint Stock Company owning 91,5% of the shares through multiple individuals and legal entities (cross - ownership) and other individuals owning 8,5%.
3: Other individuals and legal entities cross - own shares of companies in the Van Thinh Phat and SCB ecosystems. The Van Thinh Phat incident serves as a costly lesson about the risks of cross - ownership and the importance of information transparency and effective corporate governance. 2 manipulation, and enhance the legal framework. As a result, a comprehensive review of ownership structures is an immediate and essential priority for the current Vietnamese commercial banking system.
One of the first studies examining the relationship between ownership structure and the performance of commercial banks was the study by Vu Thi Thu Ha (2006). In recent years, there have been many international studies such as Rahman, N. (2017) that have found a significant relationship between ownership structure and performance. However, this structure is dispersed and has little state capital, but in Vietnam most large banks are controlled by the State Bank such as VCB, BID, CTG.
Therefore, it is completely appropriate to verify this relationship with commercial banks in Viet Nam. Thirdly, in Vietnam, there are also many studies on this topic but they only focus on state, foreign or private ownership, but there are few studies on concentrated ownership affecting profits. Therefore, this study further explains the independent variables of state ownership, foreign ownership, private ownership, and concentrated ownership, which are mainly measured through the dependent variable of profitability ROAA. Fourthly, after 35 years of reforming monetary policy and operations of the Vietnamese banking system, there have been many achievements and clear developments, notably the diversification of ownership structure.
The ownership structure creates positive developments that require leaders to also have strict management, thereby making wise decisions and management appropriate to the current time. Therefore, clarifying the impacts that affect operational efficiency is necessary to have structural reforms that are effective and less risky. Derived from these reasons, the author carry out a study on the topic "The Impact Of Ownership Structure On Vietnamese Commercial Banks’ Profitability" in the period of 2015 - 2023 to for graduation thesis. In this way, we propose appropriate management measures to help businesses achieve the following: maximize the value 3 and profitability of their enterprises, and develop more stable and sustainable business activities.
GAP OF RESEARCH AND CONTRIBUTIONS Theoretically, the research delves into the broader issues of commercial bank ownership structures, profitability, and the relationship between them. Specifically, it investigates how ownership structure impacts the profitability of commercial banks. Empirically, the research offers several key contributions: Firstly, it provides new data-driven insights into the impact of ownership structure on the profitability of Vietnamese joint-stock commercial banks. Secondly, it utilizes updated data from 2015 to 2023, reflecting the recent changes in ownership structures of Vietnamese commercial banks during this period.
Thirdly, it addresses a gap in existing Vietnamese research. While previous studies focus on the general impact of state or foreign ownership, this research delves deeper by examining the influence of concentrated ownership structures within Vietnamese joint-stock commercial banks. Finally, it moves beyond the use of dummy variables, commonly used in Vietnamese studies on ownership structure, by employing quantitative variables measured by ownership ratios.