Can foreign ownership reduce bank risk? Evidence from Vietnam
24 Pages Posted: 8 Jul 2021
Date Written: July 2, 2021
Abstract
This study investigates the impact of foreign ownership on bank risk in Vietnam between 2006 and 2015. Our findings show that foreign ownership can lower bank risk, suggesting that the State Bank of Vietnam should further remove restrictions on foreign investments in the banking system. The findings also indicate that higher bank risk is associated with greater technical efficiency, suggesting that the skimping-cost hypothesis may exist. The same conclusion is true for large banks, for banks with higher liquid assets, and those with greater loan growth. More interestingly, we do find evidence that state-owned banks with a greater level of foreign share are likely more stable. This is also true for the case of listed banks with a higher level of foreign ownership.
Keywords: Bank risk, foreign ownership, Vietnam, GMM
JEL Classification: G21
Suggested Citation: Suggested Citation