Can foreign ownership reduce bank risk? Evidence from Vietnam

24 Pages Posted: 8 Jul 2021

See all articles by Tu Le

Tu Le

Vietnam National University - Ho Chi Minh City (VNU-HCM) - University of Economics and Law

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

Le, Tu, Can foreign ownership reduce bank risk? Evidence from Vietnam (July 2, 2021). Available at SSRN: https://ssrn.com/abstract=3878912 or http://dx.doi.org/10.2139/ssrn.3878912

Tu Le (Contact Author)

Vietnam National University - Ho Chi Minh City (VNU-HCM) - University of Economics and Law ( email )

Vietnam National University - Ho Chi Minh City
Linh Xuan Ward, Thu Duc
Ho Chi Minh City
Vietnam

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