Impact Of Ownership Structure On Profitability And Risk Of Vietnamese Commercial Banks.doc

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THE UNIVERSITY OF DANANG
UNIVERSITY OF ECONOMICS
VO HOANG DIEM TRINH
IMPACT OF OWNERSHIP STRUCTURE ON
PROFITABILITY AND RISK OF VIETNAMESE
COMMERCIAL BANKS
SUMMARY OF DOCTORAL THESIS
Danang, 2022

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THE UNIVERSITY OF DANANG
UNIVERSITY OF ECONOMICS
VO HOANG DIEM TRINH
IMPACT OF OWNERSHIP STRUCTURE ON
PROFITABILITY AND RISK OF
VIETNAMESE COMMERCIAL BANKS
SUMMARY OF DOCTORAL THESIS
Major : Finance and Banking
Code : 62.34.02.01
Supervisors:
1. Assoc.Prof. Lam Chi Dung, Ph.D
2. Assoc.Pro. Dang Tung Lam, Ph.D
Danang, 2022

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INTRODUCTION
1. MOTIVATIONS
Vietnam's commercial banking system is a transformation
system, adapting to the transformation of the economy from a
centralized management mechanism to a socialist-oriented market
economy. It can be generalized into two major stages: the transition
from a one-tier banking system to a two-tiered banking system; the
next stage, forming a system of multi-owned commercial banks with
an increasingly diversified ownership structure. The transformation
of ownership structure is carried out according to a consistent policy
and follows a strict process. However, besides the great
achievements contributing to the development of Vietnam's
commercial banking system, there are still issues that need to be
understood clearly, have scientific and practical bases, which require
relatively complete and comprehensive data collection. At the same
time, conducting reliable research methods to form scientific
arguments for perfecting the ownership structure of Vietnam's
commercial banking system in the direction of increasing efficiency,
accompanied by stability of this system
In terms of academic studies, it can be seen through the
empirical research that most of researches focused on studying the
impact of ownership structure on either profitability or risk. There
are only a few studies examining the effects of ownership structure
on both profitability and risk. In addition, the results of these studies
show that there is no consensus for the impact of ownership structure
on profitability and risk of commercial banks.
In particular, the studies conducted on the subjects of
Vietnamese commercial banks have the following main
characteristics:
- Previous studies either use descriptive statistics to illustrate the
ownership, profitability and risks in banks or quantitative methods
with different approaches from this thesis. Specifically, these studies
are carried out on a small sample (in terms of both observations and
periods) and focus on a specific type of ownership such as state-
owned or foreign-owned rather than considering different types of
ownership in their relationship with bank profitabity and risk;
- The empirical data in previous research does not differentiate
between banks and listed companies. Given the specific

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intermediation characteristics of banks, the results may not be
applicable for banks.
- Those studies on the effect of ownership on Vietnamese banks’
risk consider a specific risk such as liquidity risk and credit risk
while ignoring banks’ overall risk;
- Although there is some research obout the ownership effects on
Vietnamese banks profitabilty and risk, the results’ robustness and
the endogeneity in the model have not been properly considered.
- Previous studies for banks in Vietnam have not properly
investigated the mechanism for the impact of ownership on bank
profitability and risk.
In summary, a study was conducted on the Vietnamese
commercial banking system according to a modern, comprehensive
approach, with a complete data set and updating; overcoming the
limitations in the research gaps, contributing to the diversity of
empirical evidence, thereby bringing academic and practical values
is very necessary. On that basis, the PhD student selected the topic
"Impact of ownership structure on profitability and risk of
Vietnamese commercial banks".
2. RESEARCH PURPOSES
The research purpose is analysing the impact of ownership
structure on profitability and risk of Vietnamese commercial banks,
thereby proposing useful recommendations for state management
agencies and Vietnamese commercial banks.
3. RESEARCH QUESTIONS
- In theory, based on which perspective and analysis the
ownership structure can be considered? Are there any theories
related to ownership structure, profitability, risk of commercial
banks?
- How has the ownership structure, profitability and risk of
Vietnamese commercial banks changed in recent years?
- Does ownership structure affect Vietnamese commercial
banks’ profitability and risk? How specific are the impacts?
- In Vietnam, through which mechanism does ownership
structure actually affect commercial banks’ profitability and risk?
- Based on the current situation, what are the necessary
recommendations for Vietnam’s state management agencies and
commercial banks?

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4. RESEARCH OBJECTS AND SCOPES
4.1. Research Object:
The research object is the impact of ownership structure on
profitability and risk of Vietnamese commercial banks. The research
subjects are Vietnamese joint stock commercial banks.
4.2. Research Scope:
The research focuses on studying the impact of two forms of
ownership structure on profitability and risk of Vietnamese
commercial banks: the ownership structure according to (i)
characteristics of shareholders: state ownership, foreign ownership,
domestic investor ownership and (ii) the degree of ownership
concentration of Vietnamese joint stock commercial banks in the
period 2007-2019.
5. METHODOLOGY
The research mainly uses econometric analysis method based on
unbalanced panel data. In addition, the thesis also uses some
additional methods such as descriptive statistics to help clarify the
research problems. The conclusions and implications from the study
will be based on the results from the analytical models in the thesis.
6. CONTRIBUTIONS
From theoretical perspective
First, the impact of ownership structure on profitability and risk
of commercial banks has received considerable amount of attention
from scholars in Vietnam and around the world. However, there have
been very few studies conducted simultaneously the impact of
ownership structure on both profitability and risk of commercial
banks. Simultaneous consideration of the influence of ownership
structure on both profitability and risk of commercial banks in the
same research topic will allow to place correlations in a whole,
thereby contributing to the discussion of research findings and
especially considering the implications of the findings in a
comprehensive, systematic way, rather than considering them in
isolation. This will help limit one-sided, or not considering the trade-
off between risk and return conclusions. Therefore, one of the
contributions of this thesis is conclusions from empirical research on
the impact of ownership structure on both profitability and risk;
Secondly, research methods in previous empirical studies in
Vietnam have not been given adequate attention. To overcome these

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issues, the thesis will select the most appropriate regression model
with reasonable tests to analyze the impact of different ownership
structures on profitability and aggregate risk of commercial banks in
Vietnam. The research’s sustainability outcomes and endogeneity
problems of the model are also verified in this thesis;
Thirdly, a further research on the impact of ownership structure
in the interaction relationship with corporate governance mechanism
on profitability and risk of Vietnamese commercial banks will be
studied for the first time in the thesis;
At last, the thesis will analyse the actual database related to 26
commercial banks in Vietnam for the period 2007-2019. By mean of
this, the study only focuses on Vietnamese commercial banks and
excludes all companies dealing not only in commercial banks fields.
It is also noted that the extent of this research subjects are extended,
both in terms of time study and in terms of number of Vietnamese
commercial banks.
From practical perspective
This thesis could be one of the first researches using the context
and data of Vietnam to study the impact of ownership structure
simultaneously on profitability and risk. In addition, although few
previous studies examined the effect of ownership structure on
profitability or risk of commercial banks in Vietnam, the use of panel
data with larger sample size is a new point of the thesis concentrated
on this issue.
The main research results of the thesis provide useful
recommendations for State management agencies by proposing more
practical policies to increase the efficiency, stability and soundness
of the banking system in particular and the financial system in
general; also ensure macroeconomic objectives. For commercial
banks, the thesis’ recommendations, based on scientific basis,
concern decisions to improve banking governance by adjusting the
ownership structure and/or finding solutions to promote advantages
and overcome the limitations of each type of ownership structure;
thereby increase the profitability and risk control capacity of
commercial banks.
7. THESIS STRUCTURE
This thesis is structured into four chapters, detailed as follows:
Chapter 1: Theoretical and empirical basis of the impact of

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ownership structure on profitability and risk of commercial
banks Chapter 2: Research Design
Chapter 3: Research Results
Chapter 4: Discussion and Implications
CHAPTER 1
THEORETICAL AND EMPIRICAL BASIS OF THE
IMPACT OF OWNERSHIP
1.1. Ownership structure, profitability and risk commercial
banks
This content introduces approaches to ownership structure,
profitability, and risk. At the same time, it introduces indicators to
measure profitability as well as types of risks in banking business.
1.2. Theory of the relationship between ownership
structure, profitability and risk
1.2.1. Theory of the relationship between ownership structure and
profitability
- Agency cost theory, public choice theory and ownership theory
1.2.2. Theory of the relationship between ownership structure, and
risk
- Agency Cost, Moral Hazard and Social Lending
- The Market Risk Theory and The Soft Budget Constraint
Theory
1.3 Empirical studies on the impact of ownership structure on
profitability and risk of commercial banks
This section synthesizes empirical studies on the impact of
ownership structure on profitability and risk internationally and
domestically. Studies show that there are many opposing views on
the impact of ownership structure on profitability and risk of
commercial banks.
1.4. Research gaps
Through the overview of the above research situation, we have
obtained a very rich research base at Vietnam and abroad on the
impact of ownership structure on profitability and risk of enterprises
in general and banks in particular. These studies not only show
impact trends but also explain many issues of research methods such

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as: the choice of research models, research variables, tests,
advantages and disadvantages of different methods.
However, in general as well as considering the application-
oriented research problem for the actual operation of the Vietnamese
commercial banking system, through analyzing and synthesizing the
research process and results of above studies, the following research
gaps can be found:
(i) Most of these studies either stop at purely descriptive studies;
or quantitative studies but the approach is different from this thesis;
or only research on small data samples, research time is not long
enough; or only focus on one form of ownership such as state
ownership or foreign ownership affecting profitability and risk of
commercial banks, but not really focusing on the influence of other
forms of ownership;
ii) Using the data sample of listed companies, including banks,
rather than studying the impact of ownership structure on the
performance of commercial banks, the empirical results may be true
for the sample of listed companies, but not necessarily true for
commercial banks - a field of operation with its own characteristics,
quite different from other business fields;
(ii) Analysis of the impact of ownership structure on the risk of
Vietnamese commercial banks only focuses on a specific type of
risk, such as liquidity risk or credit risk, but has not assessed the
impact of ownership structure to the overall risk of commercial
banks;
(iv) Studies on the impact of ownership structure on profitability
and risk of Vietnamese commercial banks so far have not been really
interested in testing the sustainability of results and problems.
endogenous of the model..
(v) Previous studies in Vietnamese commercial banks have not
paid much attention to studying the mechanism through which
ownership structure affects profitability and risk of commercial
banks.

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CHAPTER 2
RESEARCH DESIGN
2.1. Hypotheses on the impact of ownership structure on the
profitability and risk of commercial banks.
H1a: State ownership has a negative impact on profitability of
Vietnamese commercial banks
H1b: State ownership has a positive impact on profitability of
Vietnamese commercial banks.
H2a: Domestic ownership has a positive impact on profitability
of Vietnamese commercial banks
H2b: Domestic ownership has a negative impact on profitability
H3a: Foreign ownership has a positive impact on profitability of
H3b: Foreign ownership has a negative impact on profitability
H4a: Concentration ownership has a positive impact on
profitability of Vietnamese commercial banks
H4b: Concentration ownership has a negative impact on
profitability of Vietnamese commercial banks.
H5a: State ownership has a positive impact on risk of Vietnamese
commercial banks
H5b: State ownership has a negative impact on risk of
H6a: Domestic ownership has a positive impact on risk of
H6b: Domestic ownership has a negative impact on risk of
H7a: Foreign ownership has a negative impact on risk of
H7b: Foreign ownership has a positive impact on risk of
H8a: Concentration ownership has a negative impact on risk of
H8b: Concentration ownership has a positive impact on risk of

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2.2. Empirical method
2.2.1. Analyze the impact of ownership structure on bank
profitability
The impact of ownership structure on bank profitability has been
modelled as follows:
Profitit= β0+ β1OWNit+ β2CONTROLit +i+δt +εit
The impact mechanism of ownership structure on bank
profitability has been modelled as follows:
Profitit=β0+ β1OWNit +β2CGit + β3OWNit*CGit +
β4CONTROLit +i + δt +εit
2.2.2. Analyze the impact of ownership structure on bank
profitability
The impact of ownership structure on bank risk has
been modelled as follows:
Riskit= β0+ β1OWNit+ β2CONTROLit +i +δt +εit
The impact mechanism of ownership structure on bank risk has
been modelled as follows:
Riskit = β0+ β1OWNit + β2CGit + β3OWNit*CGit +
β4CONTROLit +i + δt +εit
With:
Profitit: is the profitability measurement for bank and year .
PROFIT is measured by ROA and ROE
Riskit: is the risk measurement for bank and year . PROFIT is
measured by ADZ, ζ(ROE) and ζ(ROA)
OWNit: Independent variable to measure the ownership
structure by State ownership, Foreign ownership, Domestic
ownership, Concentration ownership
CGit: is proxy for the corporate governance. The board
independence (INDB), board size (BOARD), Female board members
(FEB) is used to measure corporate governance
CONTROLit: control variables
i: bank fixed effect δt: year fixed effect
εit: the error term

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2.3. The variables
Table 2.1: The variables
Symbol
Description of the Expected
No. Variables for the
variable sign
variable
Dependent variables
1
Return on
ROA
Earnings after tax/ total
assets assets
2
Return on
ROE
equity euity
ADZ= Log(Zscore)
3
Adjusted Z
ADZ ( )
score
Standard
( )
4 deviation of ζ(ROE) √∑
(
⃐
)
ROE
Standard
( )
5 deviation of ζ(ROA) √∑
(
⃐
)
ROA
Independent variables
State
Percentage of equity
1 SO shares held by state +/-
ownership
ownership/ Total Equity
Foreign
2 FO shares held by foreign +/-
ownership
investors/ Total Equity
Domestic
3 DO shares held by domestic +/-
ownership
investors/ Total Equity
Concentration
4 CO shares held by block +/-
ownership ownership/ Total Equity
Corporate governance variables
1 Board INDB The number of +

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Symbol
Description of the Expected
No. Variables for the
variable sign
variable
independence independent members in
board
2 Board size BOARD
The number of individuals
+
serving on the board
3 Female board FEM Numbers of women +
members present on the board
Control variables
1 Bank size SIZE Logarithm of total assets +/-
2 Deposit ratio DEP
Total deposit/ Total
+/-
liability
3 Loan ratio LOA Total loan/ total assets +/-
4
Efficiency
EFF
Total operating expenses/
+
ratio Total operating income
5
Return on
ROE
-
equity euity
6 Liquidity ratio LIQ Total loan/ Total deposit +
2.4. Data collection
The main source of data used in this study is secondary dât
collected from audited financial statements, bank charters, annual
reports, prospectus sheets of Vietnamese commercial banks over a
period of time. 2007-2019. In which, data on ownership structure is
collected by the author on bank statements, financial data is provided
by Stoxplus.
2.5. Methodology
The thesis mainly uses econometric analysis method based on
unbalanced panel data. In addition, the thesis also uses some
additional methods such as descriptive statistics to help clarify the
research problems.
CHAPTER 3
RESEARCH RESULTS
3.1. Descriptive statistics of data

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This section presents the current status of profitability, risk and
ownership structure of Vietnamese commercial banks in the period
2007-2019
3.2. Testing the impact of ownership structure on profitability
of Vietnamese commercial banks in the period 2007 - 2019
3.2.1. Correlation analysis
3.2.2. The impact of ownership structure on profitability of
Table 3.1.The impact of ownership structure on profitability of
Variables ROA ROE ROA ROE ROA ROE ROA ROE
State
ownership 0.004** 0.045***
(2.59) (3.20)
Domestic
ownership -0.006*** -0.056***
(-3.89) (-3.80)
Foreign
ownership 0.011*** 0.042
(2.73) (1.14)
Concentration
ownership 0.003** 0.031**
(2.05) (2.04)
SIZE -0.002*** 0.044***-0.003*** 0.037*** -0.003*** 0.046*** -0.002*** 0.044***
(-2.92) (6.36) (-3.83) (5.00) (-3.26) (6.12) (-2.95) (6.16)
DEP -0.009** -0.131*** -0.008** -0.129*** -0.011*** -0.153*** -0.011*** -0.155***
(-2.55) (-4.10) (-2.41) (-4.07) (-3.27) (-4.79) (-2.84) (-4.53)
LOA -0.003 0.005 -0.004 0.005 0.002 0.047 -0.001 0.036
(-0.69) (0.12) (-0.92) (0.13) (0.42) (1.22) (-0.14) (0.89)
LIQ 0.000 0.003 0.000 0.002 0.000 0.001 0.000 0.001
(0.75) (0.67) (0.74) (0.60) (0.20) (0.22) (0.36) (0.21)
Constant 0.048*** -0.427*** 0.066*** -0.286*** 0.053*** -0.461*** 0.049*** -0.430***

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Variables ROA ROE ROA ROE ROA ROE ROA ROE
(4.70) (-4.62) (5.65) (-2.69) (4.91) (-4.61) (4.75) (-4.53)
Observations 318 318 317 317 317 317 291 291
Year fixed
effect Yes Yes Yes Yes Yes Yes Yes Yes
3.2.3. Robustness check
This section tests the sustainability of the research results,
demonstrating the reliability of the impact of structure on
profitability.
3.2.4. Analyze the impact mechanism of ownership structure on
profitability of Vietnamese commercial banks.
This content continues to extend the previous model to study the
hypothesis that the ownership structure can, through the corporate
governance mechanism, affect the profitability of commercial banks
by adding an interaction coefficient between the ownership structure
and corporate governance.
Profitit= β0+ β1OWit+ β2CGit + β3OWit*CGit + β4CONTROLit +δt +εit
3.3. Testing the impact of ownership structure on risk of
Vietnamese commercial banks in the period 2007 - 2019
3.3.1. Correlation analysis
3.3.2. The impact of ownership structure on risk of Vietnamese
commercial banks
Table 3.2: The impact of state ownership and domestic ownership
on risk of Vietnamese commercial banks
Variables ζ(ROE) ζ(ROE) ADZ ζ(ROE) ζ(ROE) ADZ
State ownership 0.009***0.057*** -0.572*
(3.60) (2.98) (-1.91)
-
Domestic ownership 0.006*** -0.029* 0.106
(-3.01) (-1.69) (0.39)
- -
SIZE 0.002*** -0.005 0.216*** 0.002*** -0.010** 0.269***
(-2.89) (-1.10) (2.93) (-4.32) (-2.24) (3.92)
LOA -0.001 0.022 0.111 -0.002 0.018 0.122

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(-0.47) (1.47) (0.47) (-0.85) (1.19) (0.51)
LIQ -0.000 -0.001 0.029 -0.000 -0.002 0.031
(-0.66) (-1.05) (1.36) (-0.83) (-1.20) (1.45)
EFF 0.001 0.027* -0.873*** 0.002 0.030* -0.875***
(0.59) (1.68) (-3.46) (0.98) (1.84) (-3.39)
ROE 0.010** 0.083** -2.546*** 0.012*** 0.091*** -2.624***
(2.46) (2.54) (-4.96) (2.82) (2.79) (-5.08)
Constant 0.024*** 0.058 -0.579 0.039*** 0.154*** -1.503*
(3.02) (0.91) (-0.58) (5.49) (2.68) (-1.67)
Year fixed effect Yes Yes Yes Yes Yes Yes
Observations 296 296 296 295 295 295
Adjusted R-squared 31.88% 15.67% 29.94% 31.54% 14.25% 28.77%
Table 3.3: The impact of foreign ownership and concentration
ownership on risk of Vietnamese commercial banks
Foreign
ownership -0.006** -0.056** 0.808**
(-2.06) (-2.29) (2.08)
Concentration
ownership 0.001* -0.001 -0.170*
(1.82) (-0.10) (-1.78)
SIZE -0.002*** -0.005 0.204*** -0.003*** -0.009*** 0.251***
(-3.10) (-1.11) (2.73) (-7.78) (-3.00) (5.02)
LOA -0.001 0.021 0.076 -0.001 0.011 0.235
(-0.66) (1.41) (0.32) (-0.40) (0.84) (1.11)
LIQ -0.000 -0.001 0.028 -0.000 -0.001 0.026
(-0.72) (-1.07) (1.34) (-0.82) (-1.04) (1.12)
EFF 0.002 0.027* -0.833*** 0.001 0.024 -0.879***
(0.82) (1.67) (-3.24) (0.62) (1.57) (-3.46)

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ROE 0.011*** 0.084** -2.515*** 0.012*** 0.121*** -3.252***
(2.62) (2.56) (-4.87) (3.01) (4.04) (-6.68)
Constant 0.035*** 0.113* -0.925 0.045*** 0.131*** -1.111*
(4.67) (1.90) (-0.99) (8.70) (3.31) (-1.72)
Year fixed effect Yes Yes Yes Yes Yes Yes
Observations 295 295 295 271 271 271
Adjusted R-
squared 32.38% 15.61% 29.66% 0.1904 0.0572 0.1703
3.3.3. Robustness check
This section examines the sustainability of the research results,
demonstrating the reliability of the impact of structure on the risk of
commercial banks.
3.3.4. Analyze the impact mechanism of ownership structure on
risk of Vietnamese commercial banks.
This section continues to extend the main model to study the
hypothesis that the ownership structure can, through the corporate
governance mechanism, affect the risk of commercial banks by
adding an interaction coefficient between the ownership structure
and corporate governance.
Riskit= β0+ β1OWit+ β2CGit + β3OWit*CGit + β4CONTROLit +δt +εit

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MAIN RESEARCH RESULTS
Ownership Profitability Risk
structure
1. State (+) The higher the state (+) The higher the
ownership ownership, the higher state ownership, the
the profitability higher the risk
2. Domestic (-) The higher the (-) The higher the
ownership domestic ownership, domestic ownership,
the lower the the lower the risk
profitability
3. Foreign (+) The higher the (-) The higher the
ownership foreign ownership, the foreign ownership,
higher the profitability the lower the risk
4. Concentration (+) The higher the (+) The higher the
ownership concentration concentration
ownership, the higher ownership, the
the profitability higher the risk
RESEARCH RESULTS THROUGH THE GOVERNANCE
MECHANISM
structure
1. State ownership * (-) The effect of state (-) The effect of
Board size ownership on state ownership on
profitability is weaker risk is weaker in
in banks with strong banks with strong
corporate corporate
governance. governance
2. Foreign No statistical No statistical
ownership * Board significance significance
size

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structure
3. Domestic (+)The negative (+) The effect of
ownership * Board effect of domestic domestic ownership
size investor ownership is on risk is weaker in
weaker in banks with strong
commercial banks corporate
with strong corporate governance
governance
4. Concentration No statistical (-) The effect of
ownership * Board significance concentration
size ownership on risk is
weaker in banks
with strong
corporate
governance
CHAPTER 4
DISCUSSION AND IMPLICATIONS
4.1. Discussion
4.1.1. The impact of state ownership on profitability of Vietnamese
commercial banks
The research results show that the higher the state ownership, the
higher the profitability and the higher the risk, consistent with
research hypothesis H1b, H5a and consistent with the findings of a
number of empirical studies in the world as well as in Vietnam. The
positive relationship between profitability and state ownership in
Vietnam comes from the following main reasons:
Firstly, due to historical characteristics, commercial banks with
state ownership have inherited the advantages of tangible assets
(facilities..), intangible assets (reputation, tradition, brand name) ...
Second, commercial banks with state ownership have advantages
in traditional relationships with economic organizations, state-owned
enterprises, and large corporations.
Thirdly, these commercial banks have the advantages of
network, having a wide network system.

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Fourth, these commercial banks have the advantages of
experience because they have been established for a long time, so
they can accumulate experience and skills.
However, besides the high profitability, the associated risks are
also high in these commercial banks. The explanation for this result
can be considered from many aspects. First, it can be seen that the
slow innovation in the corporate governance, especially in risk
management, is slow in applying modern methods in risk
measurement and management. Second, these commercial banks,
besides the advantages of relationships, also face adverse effects
from these relationships such as having to finance state-owned
enterprises and state-owned corporations. The third is the issue of
agents and entrustors. In these commercial banks, the problem of
asymmetric information and agency costs will be higher. Fourth,
these commercial banks have to carry out political responsibilities,
thus increasing risks.
4.1.2. The impact of domestic ownership on profitability of
Research results show that the higher the domesti ownership, the
lower the profitability of commercial banks, the lower the risk. This
result supports the research hypothesis H2b, H6b and is consistent
with some previous research results. This result may be due to a
number of reasons: domestic investors do not have advantages in
terms of tangible assets, relationships, and brand names, etc., so
these commercial banks can hardly compete with state ownership
commercial banks; these commercial banks also have difficulty in
expanding their network; these commercial banks were established
later, do not have the advantages of experience as well as scale,
especially the scale of capital; the initial capital of these commercial
banks is also not abundant, and cross-ownership has caused many
negative consequences.
In addition to the limitations, commercial banks with a high
percentage of domestic ownership will be cautious when making
business strategies to minimize risks to preserve capital. These
commercial banks do not have much support from the State, do not
have support from foreign investors to be able to take advantage of
the experience and advanced technology in governance, so that
managers more cautious. The corporate governance system of these

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commercial banks is also easier to innovate than that of commercial
banks with high state ownership. In addition, according to the agency
cost theory, when the percentage of domestic investor ownership is
high, the situation of asymmetric information will be reduced,
thereby reducing risks.
4.1.3. The impact of foreign ownership on profitability of
For the foreign ownership, the regression results show that the
higher the foreign ownership, the higher the profitability and the
lower the risks of Vietnamese commercial banks. This result
supports the hypothesis H3a, H7a and is consistent with previous
experimental studies in the world as well as in Vietnam.
This result can be explained in the case of Vietnamese
commercial banks for a number of reasons. Firstly, these commercial
banks have advantages in corporate governance, complying with
governance standards better than other types of ownership. Second,
commercial banks with foreign ownership can exploit the advantages
of relationships with foreign partners. Third, these commercial banks
are more independent in their management decisions and are also
less influenced by political responsibility. Fourthly, commercial
banks with foreign ownership can take advantage of foreign
investors' strengths in science and technology, professional
production processes, management and marketing capabilities as
well as accessibility to foreign financial capital and high quality
human resources. Foreign investors can also help the credit
management as well as the appraisal work more effectively, the
bank's lending operations are improved, and bad debts are reduced.
Finally, when foreign investors are involved, commercial banks have
to carry out more frequent reporting and auditing activities, which
reduces the problem of opportunity and the self-interest of managers,
thereby can operate more efficiently.
4.1.4. The impact of concentration ownership on profitability
of Vietnamese commercial banks.
For concentration ownership, the research results show a positive
impact of concentration ownership on profitability and risk of
Vietnamese commercial banks. This result supports the research
hypothesis H4a, H8b and is consistent with some previous research

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19
results.
This positive effect is consistent with some arguments. First,
concentration ownership has few shareholders and shareholders hold
the controlling power, capital is only concentrated on a few people,
so they are responsible for the amount of contributed capital. These
will reduce conflicts between shareholders and take advantage of
agency cost advantages. Second, it is easier to make decisions in
commercial banks with high concentration of ownership. Thirdly,
major shareholders have the motivation and power to control the
activities of commercial banks closely, so mistakes or frauds in
governance and management activities will be limited, reducing
costs, agency fee. These commercial banks also easily get capital
stability because large shareholders often invest in long-term, easy to
make decisions, and conflicts of interest are reduced.
However, when the concentration of owners is high, conflicts
between owners and managers can lead to negative consequences,
creating many risks in business operations. In these commercial
banks, decisions are made easier but less considered, due to the small
number of major shareholders and concentration.
4.2. Legal and practical basis for the orientation to perfect the
ownership structure of Vietnam's commercial banking system.
Decision No. 986/QD-TT dated August 8, 2018 of the Prime
Minister, the development strategy of Vietnam's banking industry to
2025, orientation to 2030 shows the basic policy orientations on the
ownership structure of the Vietnamese commercial banking system.
For foreign ownership, Decree No. 01/2014/ND-CP on foreign
investors buying shares of Vietnamese credit institutions stipulates
that the total share of foreign investors is not exceed 30% of the
charter capital of a Vietnamese commercial bank.
Besides, the EU-Vietnam Free Trade Agreement (EVFTA) has
officially taken effect since August 1, 2020. According to this
agreement for banking services, within 5 days from the date of entry.
When the EVFTA comes into effect, Vietnam commits to consider
facilitating and allowing EU credit institutions to raise foreign
holdings to 49% of charter capital in two Vietnamese joint stock
commercial banks.
From a micro perspective, commercial banks are under great

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20
pressure to increase capital to meet the requirements of the minimum
capital adequacy ratio according to Basel II standards. In 2016, the
SBV issued Circular No. 41/2016/TT-NHNN requiring that from
January 1, 2020, commercial banks will have to officially apply the
capital adequacy ratio according to Basel II standards (8%).
Previously, according to Circular 13/2010/TT-NHNN and Circular
36/2014/TT-NHNN, commercial banks were required to maintain a
capital adequacy ratio of at least 9% between own capital and total
risky assets. according to Basel I.
The roadmap to apply Basel II will create new motivations and
pressures on the process of increasing equity as well as restructuring
the ownership structure of the Vietnamese commercial banking
system in the coming years.
4.3. Recommendations for stakeholders
4.3.1. Recommendations for government agencies
Firstly, government agencies need to develop policies to control
competition, limit the scale to a reasonable level in each
development period, and create a soundness in the entire banking
system. Second, in order to reduce the situation of asymmetric
information, government agencies need to perfect their supervision
and information policies, requiring commercial banks to provide
sufficient information as prescribed. Third, it is necessary to promote
the role of inspection and supervision of the owners, promote
innovation in the governance system in the bank, and develop
appropriate governance mechanisms for each group of owners.
government agencies need to have policies and regulations to
separate more thoroughly the business and political tasks of
commercial banks, especially commercial banks with high state
ownership.
For foreign ownership, there should be solutions to encourage
the increase of foreign ownership ratio in commercial banks.
Currently, although according to Decree No. 01/2014/ND-CP, the
maximum total shareholding rate of foreign investors is 30%,
currently out of 26 commercial banks in the sample, only 5
commercial banks have a foreign ownership ratio of 30%. During the
implementation of the thesis, the author found that in the specific
context of Vietnam, with the information environment is not really

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21
transparent, the protection of investors' interests, especially foreign
investors, have not been given due attention. Moreover, when the
foreign ownership rate is low, it is not possible to best promote the
strengths in corporate governance to influence the performance of
commercial banks in the best way. In order for foreign investors to
promote their strengths in expertise, experience, technology,
management capacity, etc., it is necessary to own a significant
percentage in commercial banks or they must be strategic investors
In addition to setting forth policies to attract foreign capital, the
government agencies also need to have regulations limiting the share
holding rate of a foreign investor as well as the time allowed to
withdraw capital of investors. Foreign investment, due to large
foreign ownership will increase the risk for the bank and the sudden
and rapid withdrawal of capital can affect the financial position of
Vietnam's commercial banking system as well as the entire economy.
Regarding the long-term solutions, the government agencies can
continue to consider the direction of increasing the ownership rate
for foreign investors in the context of Vietnam's participation in the
integration of the World Free Trade Agreement (FTA), the
Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and the Free Trade Agreement between
Vietnam and the European Union (EVFTA). In addition, it is
necessary to strengthen the protection of investors' interests,
especially foreign investors, thereby encouraging them to actively
invest in the banking sector, taking advantage of the strengths of
foreign investors in dealing with bad debts, improving the corporate
governance in the bank. In addition, the regulatory agencies also
need to quickly standardize the regulations in the operation of
commercial banks in accordance with international practices,
especially according to the goals and principles of Bassel II, Bassel
III. At the same time, there is a plan to perfect the legal framework
and regulations on investor protection in banking activities, ensuring
uniformity and efficiency towards the goal of building a unified legal
document on protection of investors.

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22
For concentration ownership, theoretically when there is a high
concentration, the owners perform better the internal supervision
function for commercial banks and also better handle the limitations
of agency costs. . . However, in reality in Vietnam, major
shareholders are still passive about their rights, especially
supervision rights. From these facts, it is necessary to have more
specific regulations and instructions from the government agencies
so that shareholders, especially block shareholders, to better perform
their role of supervision, monitoring to increase profitability and
reduce risk. Government agencies as well as the State Bank need to
step by step grant more autonomy and self-responsibility to
commercial banks, to avoid interfering too deeply in the operations
of commercial banks.
Finally, government agencies need to create a fair business
environment for commercial banks.
4.3.2. Recommendations for commercial banks
Firstly, commercial banks can self-adjust their ownership
structure according to the orientation of government agencies, taking
advantage of each type of ownership structure to increase
profitability and reduce risks.
Secondly, Vietnamese commercial banks need to promote their
advantages and overcome the limitations of each type of ownership
structure, thereby increasing profitability and minimizing risks.
In addition, the results of research on the mechanism affecting
profitability and risk of Vietnamese commercial banks showed an
important role of corporate governance in banks. With good
governance, new commercial banks can be more transparent, create
higher value, and supervise more effectively. Corporate governance
in banks not only directly affects the value of the bank but also the
reputation and position of commercial banks. Therefore, it is
necessary to improve the efficiency of corporate governance in
commercial banks. Some recommendations to promote corporate
governance in commercial banks include:
The first is to comply with the principles and provisions of the
law in corporate governance. The Organization for Economic Co-
operation and Development (OECD) has set out a number of
principles in corporate governance. Each major principle includes

TEAMLUANVAN.COM
23
many small principles and is suitable for each type of company
operating in different fields.
The second is to improve the organization of the Board of
Directors and the Executive Board.
Thirdly, commercial banks need to improve their internal
governance capacity. Internal management includes many contents
related to human resource management, financial management, risk
management, market management, brand management, customer
management...
Fourth, commercial banks must strengthen their business
capacity. Commercial banks need to step up the analysis, forecasting,
statistics, assessment of the market situation, competitors, etc. to
promptly respond to changes in the environment. Next, it is
necessary to strengthen the transparency of the information system
fully and clearly internally as well as externally. Finally, commercial
banks need to improve processes and regulations to comply with ISO
management processes in the direction of increasingly standardized.
CONCLUSION
To meet the main research objective, the author conducts
research on the theoretical bases related to the thesis, overviews
related researchs on the international and domestic scale. On that
basis, identify research gaps, build appropriate hypotheses and
models. Understanding the current status of ownership structure,
profitability and risk of Vietnamese commercial banks in the period
2007-2019, creating a basis for testing the impact of ownership
structure on profitability and risk.
Limitations and Future researchs
Besides the obtained results, the thesis still has certain
shortcomings that future studies need to overcome.
Firstly, for ownership structure, the thesis only focuses on the
impact of state ownership, domestic ownership, foreign ownership
and concentrated ownership on the risks of commercial banks. The
thesis has not analyzed other ownership structure approaches such as
organizational ownership, family ownership... and has not explored

TEAMLUANVAN.COM
24
the cross-ownership relationship in commercial banks. This may lead
to some limitations when drawing in-depth conclusions, as a basis
for proposing recommendations to state management agencies and
commercial banks.
Secondly, when testing the impact of ownership structure on
profitability and risk of commercial banks, the thesis has limited the
possibility of reverse impact from profitability and risk on ownership
structure by using the lagged value of the ownership structure
variable in the regression model. However, the reverse effect from
profitability and risk on ownership structure may still exist. The best
way to solve the inverse relationship problem is to use the
instrumental variable method. However, this is a major difficulty in
experimental studies. Choosing the wrong instrument variable (weak
instrument) will lead to an even larger error in the estimate.
Therefore, the selection of IV estimators for models should pay
special attention to the effectiveness of the method.
In the future, studies can learn and use the appropriate
instrumental variable (IV) to thoroughly solve the endogeneity
problem of panel data regression model. In addition, in terms of
content, it is possible to expand the scope of further research on the
regulatory impact of corporate governance in the relationship
between ownership structure, profitability and risk of Vietnamese
commercial banks.
Although the thesis still has some certain limitations, in Vietnam,
research topics on the relationship between ownership structure,
profitability and risk are still quite a few, so this study still has
certain contributions to making some recommendations to increase
profitability and reduce risks for commercial banks, especially in the
period of restructuring Vietnam's banking system.

TEAMLUANVAN.COM
LIST OF PUBLISHCATIONS
No. Journal article Journal
1
The impact of foreign ownership on
VEAM
profitability of Vietnam firms.
UHD-CTU
2
Determinants of Credit Risk of Commercial Annual
Banks in Vietnam. Economics and
Business.
The impact of State ownership on
3 profitability of Vietnamese commercial ICYREB
banks
The impact of foreign ownership on capital
4 structure of Vietnamese firms listed on Ho COMB
Chi Minh stock exchange
Proceedings of
16th
international
The impact of ownership structure on bank
conference on
5 management,
risk taking- Theoretical outlook
enterprise and
benchmarking,
Budapest,
Hungary
Proceedings of
16th
international
Bank competition and financial stability:
conference on
6 management,
The case of Vietnamese commercial banks
enterprise and
benchmarking,
Budapest,
Hungary
7
Corporate governance and profitability of
ICOAF
vietnamese commercial banks
The Relationship between Risk and Return Asian Economic
8 - An Empirical Evidence from Real Estate and Financial
Stocks Listed in Vietnam Review

TEAMLUANVAN.COM
No. Journal article Journal
The Dynamic Relationship between
International
Journal of
Ownership Structure and Corporate
9 Economics and
Performance: Evidence from the
Business
Vietnamese Food Industry
Administration
The impact of ownership structure on
10 profitability of Vietnamese commercial Banking Review
banks
The impact of service delivery technology
Journal of
11 Science and
on bank performance: Evidence in Vietnam
Technology

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