Corporate governance of banks in Vietnam and their roles on banks’ risk-taking and efficiency : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Banking Studies at Massey University, Manawatu Campus, New Zealand
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Date
2020
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Massey University
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Abstract
This thesis comprises three essays that investigate the effectiveness of corporate governance mechanisms associated with recent Vietnamese banking reform on Vietnamese banks’ risk-taking and efficiency. The thesis uses a hand-collected dataset on accounting and corporate governance data from annual statements published by commercial banks during the 2006-2016 period.
The first essay examines the role of foreign directors on bank risk-taking, using data from 32 commercial banks in Vietnam in the 2006-2016 period. Our findings suggest foreign directors increased bank risk-taking after 2011. The relationship is robust after taking account of potential endogeneity problems and different measures of bank risk-taking. The explanation is that foreign directors are motivated to encourage management to increase risk-taking to earn short-term returns when there is uncertainty in macroeconomic conditions. Other characteristics such as female directors, family related directors, and board size on risk-taking are also discussed. There is no evidence showing that foreign directors are more or less risk-averse in listed banks vs unlisted banks or in state-owned banks vs private banks.
The second essay investigates the impact of female directors on boards on bank efficiency, using data from 32 commercial banks, covering the 2006-2016 period. The relationship is estimated by employing one-stage stochastic frontier analysis, using the Battese and Coelli (1995) (BC95) approach. The two-stage distributional free approach proposed by Cornwell, Schmidt, and Sickles (1990) (CS90) is employed as a robustness check. The result shows a robust relationship between female directors and cost-efficiency. This suggests that female directors are associated with a decrease in cost efficiency. A possible explanation is that female directors are less experienced in management than male directors and have less access to environmental resources that benefit firms.
The third essay examines the impact of mergers and acquisitions (M&As) on bank efficiency, using a balanced panel dataset from 22 commercial banks over the 2008-2016 period. The study employs a two-stage DEA window analysis. Our findings suggest that there is no significant relationship between M&As and bank efficiency, which is not surprising given the small number of M&A events so far. However, there is evidence that Vietnamese banks experienced less improvement in efficiency after M&As. A possible explanation for this is that the M&As might not be not driven by profit-maximization, but by the government encouragement to rescue weak banks. Also, the combined entities need to spend additional resources on resolving the bad debts transferred from the weak, targeted banks.
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Banks and banking, Bank management, Corporate governance, Directors of corporations, Vietnam