Tác động của quản trị công ty đến rủi ro và hiệu quả tài chính của các ngân hàng thương mại ở việt nam tt anh

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY HO CHI MINH CITY PHAM HOANG AN IMPACTS OF CORPORATE GOVERNANCE ON RISKS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN VIETNAM SUMMARY OF PHD THESIS Major: Finance - Banking Code: 9.34.02.01 Scientific instructors: Dr NGUYEN VAN THUAN Dr TRAN DUC THUC HO CHI MINH CITY – 2020 CHAPTER 1: OVERVIEW OF THE RESEARCH 1.1 Research issues and urgency Corporate governance (CG) is a topic that has attracted a lot of attention from researchers and business managers around the world and especially the recent crisis of 2007-2009 has revealed some weak points in corporate governance mechanisms in different countries The crisis initially began in the financial sector in the United States (such as: Lehman Brothers and IndyMac), the UK (such as Northern Rock, Bradford and Bingley, Alliance and Leicester, HBOS and Royal Bank of Scotland) and other developed economies and led to significant losses in financial institutions around the world for several months (Erkens et al, 2012) Therefore, concern about good corporate governance is an urgent requirement, especially corporate governance in banks Banking activities are always accompanied by risk acceptance and the level of bank risk can increase very quickly and easily Banks can conceal (in part) their true level of risk that is not visible to any outside investor (Becht et al., 2012) Moreover, the bank’s corporate governance is different from the corporate governance of other companies as the bank’s related parties are not only shareholders but also depositors and managing bodies (Becht et al., 2012) Another special feature is that the ratio of equity in a bank’s total assets is often much lower than that of non-financial companies Since 2011, foreign banks with strong financial resources and strong international experience have been given equal rights in all fields with domestic banks Market share in the banking and financial sector in Vietnam is becoming increasingly crowded with many business enterprises in the industry Keeping market share and growing business in a fiercely competitive environment is becoming more difficult than ever The key to leading the success of commercial banks can confidently stand and thrive in the context of fierce competition with foreign banks, Vietnamese commercial banks need to change their minds about modern banking management, with special emphasis on risk management and meeting international governance standards Corporate governance (CG) is a topic that has always attained a lot of attention during the development of the economy Many large organizations such as OECD, World Bank have made great efforts to develop healthy and effective corporate governance principles For the banking and financial sector, due to the important and specific role of commercial banks (commercial banks) for the stability and sustainability of the entire economy, due to the boom of the financial crisis accompanying the weaknesses and failures in the operations of many commercial banks over the past time, corporate governance and risks in commercial banks are becoming the top concern in many countries around the world, from developed countries with outstanding finance such as the United States, Europe, Japan until developing countries with new financial and banking markets which are at an early stage including Vietnam Internal corporate governance mechanisms are often responsible for developing and executing strategic decisions in most organizations The consequence of the crisis has been evaluated by the researchers and has a high consensus that it is related to the performance of the Board of Directors and is considered as one of the main reasons for the crisis (De Andres and Vallelado, 2008; and Erkens et al, 2012) The Board of Directors is also held responsible for not protecting shareholders’ rights and focusing on short-term rather than long-term organizational goals (Erkens et al., 2012) Recognizing the importance of the relationship between corporate governance, risk and financial performance of the bank, the Basel Committee on Banking Supervision has issued regulations to solve issues related to risk management and corporate governance in banks In 1988, Basel I was issued focusing on credit risk and bankruptcy risk In 2004, Basel II was issued guiding capital safety, risk management requirements and information disclosure And by the end of 2010, Basel III made many new proposals on capital, leverage and liquidity standards to strengthen the regulations, supervision and risk management of the banking sector The Basel Committee on Banking Supervision (2010), points out that effective Corporate Governance practices are essential to building and maintaining public trust in the banking system These are essential elements for the healthy operation of the banking industry as well as the whole economy Weak corporate governance can lead to the collapse of banks, causing serious social and economic losses due to the negative effects on the deposit insurance system, as well as to impact large macroeconomic impacts, such as chain risks, adversely affect payment systems In addition, weak Corporate Governance can cause the market to lose confidence in the bank’s ability to effectively manage assets and liabilities, including deposit assets This can ignite a sudden withdrawal of deposits and lead to a solvency crisis of the bank In fact, in addition to responsibilities for shareholder, banks are also responsible for their depositors and other relevant stakeholders The Corporate Governance rules of banks announced by the Basel Committee also specifically emphasize the role and importance of the Board of Directors The Board of Directors not only prevents ineffective management practices leading to business mistakes but also ensures that the bank always takes advantage of opportunities to add value to all stakeholders In addition, the Board of Directors affects the supervisory mechanism for senior managers, and also affects the appointment, dismissal, suspension and remuneration policies (BCBS, 2010) In the scheme of restructuring the system of credit institutions (CIs) in the period of 20111015 and the period of 2016 - 2020, there is a proposal to restructure the banking governance system, including: increasing transparency in public disclosing information, changing the capital ownership ratio of commercial banks, improving the conditions and standards of management capacity, working experience and professional qualifications for leading and managing titles of credit institutions (Chairman of Board of Directors/Board of Members, General Director/Director, Members of Board of Directors/Board of Members, ) (Government, 2012, 2017) During this period, many banks have gradually improved their governance capacity towards international standards But through the event on August 20, 2012 occurred at Asia Commercial Joint Stock Bank and most recently, especially at Ocean Commercial Joint Stock Bank, Construction Commercial Joint Stock Bank, Global Petroleum Commercial Joint Stock Bank and Dong A Commercial Joint Stock Bank made managers and the public is really worried about the personnel, management and performance of commercial banks Stemming from the aforementioned issues, the author chooses the topic: “The impact of corporate governance on risks and financial performance of commercial banks in Vietnam” as his research topic 1.2 Objectives of the study The overall objective of the thesis is to study the impact of corporate governance on risks and financial performance of commercial banks in Vietnam From the research results, the thesis will also discuss policy implications to improve corporate governance capacity, limit risks and improve the financial performance of commercial banks in Vietnam To achieve the overall objective, the thesis respectively resolves three specific objectives as follows: - Objective 1: Testing the impact of corporate governance on the risks of commercial banks in Vietnam - Objective 2: Testing the impact of corporate governance on the financial performance of commercial banks in Vietnam - Objective 3: Proposing some policy implications to improve corporate governance capacity, limit risks in order to improve the financial performance of commercial banks in Vietnam 1.3 Research question To achieve the above research goal, the research focuses on finding answers to the following questions: - Question 1: What factors of corporate governance affect the risks of commercial banks in Vietnam? - Question 2: What factors of corporate governance affect the financial performance of commercial banks in Vietnam? - Question 3: What policy implications can be applied to improve corporate governance capacity, limit risks to improve the financial performance of commercial banks in Vietnam? 1.4 Object and scope of the study 1.4.1 Research subjects: The impact of corporate governance on risks and financial performance of commercial banks in Vietnam 1.4.2 Research scope: - In terms of space: Research of commercial banks in Vietnam - In terms of time: The study focuses on the period from 2011 to 2017 Because in this period, Vietnamese commercial banks began to apply the Law on Credit Institutions in 2010, including many new regulations on organization, administration and management in accordance with international practices At the same time, in this period, Vietnamese commercial banks also performed a comprehensive restructuring of their operations, including restructuring the banking management system - In terms of content: There are many ways to measure corporate governance such as corporate governance index or use of representative variables, so the scope of this study only uses variables that represent corporate governance to analyze the impact of corporate governance on the bank’s risk and financial performance 1.5 Research Methods - To solve the set goals, the research uses the following research methods: + Building regression models to test and estimate the impact of corporate governance on the bank’s risk and financial performance Specifically, the research conducts to build econometric models based on the models of previous studies with appropriate adjustments to study the impact of corporate governance on risks and financial performance of commercial banks in Vietnam + Researching to use the method of panel regression analysis with the methods (OLS, FEM, REM) to estimate the models In addition, the research also uses a number of methods to test for some hypothetical errors as well as ensure the correctness of the model used in the study In addition, the research also uses SGMM (System Generalized Method of Moments) method to deal with endogenous problems (if any) in the research model - Research data: Data used in this study are taken from annual reports, corporate governance reports, audited financial statements of 29 commercial banks in Vietnam, and World Economic Outlook (WEO) of the International Monetary Fund (IMF), General Statistics Office of Vietnam, 2011 - 2017 1.6 Achievements and new contributions of the topic With the above research objectives and research methods, the results have shown that in the context of Vietnam, the results are: (i) the factors of corporate governance that impact on bank risk, including: percentage of independent members of Board of Directors (Bindep), percentage of female members of Board of Directors (Femdir), percentage of foreign members of Board of Directors (Fordir), percentage of members of Board of Directors taking part in management (Execdir); (ii) factors of corporate governance affecting the financial performance of the bank, including: ratio of independent members of Board of Directors (Bindep), percentage of female members of Board of Directors (Femdir), percentage of members of Board of Directors taking part in the management (Execdir), the education level of the Board of Directors (Edu) As compared to the previous experimental studies, the thesis has some new contributions: + The thesis analyzes for the first time the impact of corporate governance on risks and financial performance on commercial banks in Vietnam + The thesis presents briefly and fully the theory of corporate governance about the risks and financial performance of banks This is the basis for arguing and developing experimental studies of previous authors into this thesis + The thesis has codified experimental studies analyzing the impact of corporate governance on bank risk and experimental studies analyzing the impact of corporate governance on the bank’s financial performance + The thesis has proposed to use a variable of the percentage of members of Board of Directors taking part in management in accordance with the provisions of Paragraph 1, Article 34 of the 2010 Law on Credit Institutions + The thesis has provided experimental evidence on the factors of corporate governance affecting the risks and financial performance of commercial banks in Vietnam 1.7 The structure of the thesis CHAPTER 2: THEORETICAL BASIS ON THE IMPACT OF CORPORATE GOVERNANCE ON RISKS AND FINANCIAL PERFORMANCE OF THE BANK 2.1 Theoretical basis 2.1.1 Corporate governance concept 2.1.2 The difference between corporate governance in banks and other companies 2.1.3 Measure corporate governance Table 2.1 Corporate governance metrics No Name of factor Signification Method of calculation Bsize Members of Board of Directors Number of members of Board of Directors Bindep Independent Members of Board Number of independent numbers of Board of Scientific bases De Andres and Vallelado (2008), Belkhir (2009), García-Meca et al (2015), Kusi et al (2018) De Andres and Vallelado (2008), Liang et al No Name of factor Signification Method of calculation of Directors Directors Femdir Female members of Board of Directors Number of female members of Board of Directors Fordir Foreign members of Board of Directors Number of foreign members of Board of Directors Execdir Members of Board of Directors taking part in management Number of members taking part in management of Board of Directors Edu Education level of Board of Directors Number of members with postgraduate level of Board of Directors Scientific bases (2013), García-Meca et al (2015) Pathan and Faff (2013), García-Meca et al (2015), Dong et al (2014), Mamatzakis and Bermpei (2015) Dong et al (2017) The author proposes to comply with Paragraph 1, Article 34 of the Law on Credit Institutions 2010 of Vietnam Berger et al (2014), Chan et al (2016), Setiyono and Tarazi (2018) Source: Author’s proposal 2.1.4 The theory of corporate governance 2.1.4.1 Agency theory 2.1.4.2 Stewardship theory 2.1.4.3 Stakeholder theory 2.1.4.4 Resource dependence theory 2.1.5 Risks in banking business 2.1.5.1 Concept of risk 2.1.5.2 Types of risks in banking business 2.1.6 Financial performance in banking and measurement method 2.2 The impact of corporate governance on risks and financial performance of the bank 2.2.1 The impact of corporate governance on bank risk 2.2.1.1 Scale of Board of Directors and bank risk 2.2.1.2 Independent members of Board of Directors and bank risk 2.2.1.3 Female members of Board of Directors and bank risk 2.2.1.4 Foreign members of Board of Directors and bank risk 2.2.1.5 Members of Board of Directors taking part in management and bank risk 2.2.1.6 Education level of Board of Directors and bank risk 2.2.2 The impact of corporate governance on the financial performance of the bank 2.2.2.1 Scale of Board of Directors and financial performance of the bank 2.2.2.2 The percentage of independent member and financial performance of the bank 2.2.2.3 The percentage of female members of Board of Directors and the financial performance of the bank 2.2.2.4 The percentage of foreign members of Board of Directors and the financial performance of the bank 2.2.2.5 Percentage of members taking part in management of Board of Directors and financial performance of the bank 2.2.2.6 The percentage of members of Board of Directors with postgraduate level and financial performance of the bank 2.2.3 The relationship between risk and financial performance in the context of corporate governance 2.3 Research gaps 2.3.1 Research gaps The subject is conducted for the following reasons: First, through a review of previous studies, although there is evidence that banks’ compliance with Corporate Governance has increased, the impact of Corporate Governance on risks and financial performance of banks has differences in results from different studies such as positive, negative or non-relational effects, even mixed effects or no conclusions in previous studies in developed countries and these studies when verified in emerging markets give inconsistent results like those in developed markets Controversy occurs, the researchers argue that there are two reasons: (i) there are economic and political changes in developing countries, and all of these changes affect mechanisms of Corporate Governance; The result is an impact on the bank’s risk and financial performance Therefore, Corporate Governance is likely to continue to grow (ii) there are a significant differences in Corporate Governance in emerging markets and developed countries, that the development of financial markets is still limited, and therefore, the use of traditional financial channels become popular; high concentrated ownership structure; low institutional ownership; the market is less efficient because of less transparency, greater information asymmetry, higher supervision and enforcement costs; the government and its related organizations not only establish laws but also participants are active in the economy, for example through state-owned or state-controlled companies; trend-following investment is common, partly as a result of the inefficient market, but partly due to social practices Vietnam is a developing country and the legal environment is in the stage of completion to integrate with other countries in the region, therefore, there is a need for a study on the impact of Corporate Governance on risks and financial performance of banks Second, current researches in Vietnam also focus on giving the concepts of Corporate Governance and Corporate Governance in banks, international practices on Corporate Governance in banks From there, to assess the status of Corporate Governance in banks and make recommendations and solutions to improve Corporate Governance capacity to improve banking performance As researched by Ha Thi Thieu Dao (2012) assess the status of Corporate Governance of Vietnamese commercial banks according to international practices on Corporate Governance Meanwhile, Le Thi Huyen Dieu and Nguyen Trung Hau (2012) proposed to change the Corporate Governance management thinking in Vietnamese commercial banks, especially focus on risk management and meet international management standards; and Le Hoang Nga (2012) mainly gives cognitive thinking and some focused measures, which need to be done immediately to implement Corporate Governance in Vietnamese commercial banks There are very few experimental studies in Vietnam that analyze the impact of Corporate Governance on risk and financial performance of banks Third, experimental studies in Vietnam now only analyze the impact of Corporate Governance on banking performance (Le Vinh Trien and Nguyen Duc Thinh, 2012; Dao Thi Thanh Binh and Huynh Thi Huong Giang, 2012 ; Tu et al, 2014) There are very few experimental studies in Vietnam that analyze the impact of Corporate Governance on bank risk or the impact of Corporate Governance on risks and financial performance of banks Finally, studies in the world mainly use data until 2013 and the researches conducted in Vietnam only stopped in 2012 There have been no updated studies for commercial banks in Vietnam until the latest in 2017 Especially, in the period of 2011 - 2017, Vietnamese commercial banks implemented comprehensive restructuring of operations, including restructuring of banking management system The implementation of research during this period will help bank administrators and policy makers see the overall picture of the impact of Corporate Governance on risks and financial performance of commercial banks in Vietnam to adopt policies for improvement of the Corporate Governance management capacity, minimize risks and improve financial performance of the bank The above reasons suggest that there should be an evaluation study of the impact of Corporate Governance on risks and financial performance of commercial banks in Vietnam 2.3.2 Analytical framework 18 Xit: The control variables include bank characteristics and macro variables: bank size (SIZE), size of lending activities (LAR), equity size (CAP), Loan to Deposit ratio (LDR), Bank Liquidation (LIQ), Management Effectiveness (CTI), Listed Bank (List) and Economic Growth (Ecogrow) 𝛼 ,γ,δ: Are the estimated coefficient vectors ε𝑖𝑡 :: Is the standard error 3.4.2 Measure of variables in the research model 3.4.2.1 The variable depends on financial performance - The thesis measures the financial performance of Vietnamese commercial banks by the ratios: Return on Assets (ROA) is a key parameter of management performance It shows the ability of the Board of Directors in the process of converting a bank’s assets into net income and inherited from research by De Andres and Vallelado (2008); Lin and Zhang (2009); Grove et al (2011); Adams and Mehran (2012); Liang et al (2013); García-Meca et al (2015) ROA is calculated based on the following formula: 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 - Return on equity (ROE) is an indicator measuring the percentage of income for the bank’s shareholders It represents the income that shareholders receive from investing in a bank and inherited from research by Staikouras et al (2007); Lin and Zhang (2009); Rowe et al (2011); Westman (2011); Fahlenbrach and Stulz (2011); Aebi et al (2012); Liang et al (2013); Elyasiani and Zhang (2015) ROE is calculated based on the following formula: 𝑅𝑂𝐴 = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥 𝐸𝑞𝑢𝑖𝑡𝑦 - Net Interest Margin (NIM) is one of the most important measures for measuring financial performance in a deposit taking institution (Golin, 2001) Because it usually accounts for 70-85% of a bank’s total income, the higher the percentage, the higher its profit In particular, in Vietnam, credit activities make up the main profit in banking activities Net Interest Margin is calculated by the following formula: 𝑅𝑂𝐸 = NIM = Interest returns – Interest paid Total assets 3.4.2.2 Independent variables for corporate governance in the model a) Size of Board of Directors Hypothesis 1c (H1c): The size of the Board of Directors has positive impacts on the financial performance of the bank 19 b) Independent members of Board of Directors Hypothesis 2c (H2c): The percentage of independent members in the Board of Directors has positive impacts on the financial performance of the bank c) Female members of Board of Directors Hypothesis 3c (H3c): The high percentage of female members in the Board of Directors has positive impacts on the financial performance of the bank d) Foreign members of Board of Directors Hypothesis 4c (H4c): The high percentage of foreign members in the Board of Directors has positive impacts on the financial performance of the bank e) Ratio of members of Board of Directors taking part in management Hypothesis 5c (H5c): The high percentage of members of the Board of Directors taking part in management has negative impacts on the financial performance of the bank f) Education level of Board of Directors Hypothesis 6c (H6c): The percentage of members of the Board of Directors with postgraduate degrees has positive impacts on the financial performance of the bank 3.4.2.3 Control variables in the model 3.5 Measuring the relationship between risks and financial performance of commercial banks in Vietnam + Regression equation is as follows: 𝐑𝐢𝐬𝐤 𝑖𝑡 = 𝛼0 + 𝛼 𝐅𝐏𝑖𝑡 + 𝛾 ∗ 𝐶𝐺𝑖𝑡 + 𝛿 ∗ 𝑋𝑖𝑡 + 𝜀𝑖𝑡 + (3) 𝐅𝐏𝑖𝑡 = 𝛼0 + 𝛼 ∗ 𝐑𝐢𝐬𝐤 𝑖𝑡 + 𝛾 ∗ 𝐶𝐺𝑖𝑡 + 𝛿 ∗ 𝑋𝑖𝑡 + 𝜀𝑖𝑡 (4) + Regression equation is as follows: In which: α0: Coefficient of original coordinates; i: Cross data of banks; t: Current year (t = 1, , k); Riskit: Risks of bank i (Z-score, NPL) at time t; FPit: Financial performance of bank i (ROA, ROE, NIM) at time t; CGit: Are variables representing the Corporate Governance of bank i at time t, including: size of the Board of Directors (Bsize), the percentage of independent members of Board of Directors (Bindep), Number of female members of Board of Directors (Femdir), the percentage of foreign members of Board of Directors (Fordir), the percentage of members 20 of Board of Directors taking part in management (Execdir), and Education level of Board of Directors (Edu) Xit: The control variables include bank characteristics and macro variables: bank size (SIZE), size of lending activities (LAR), equity size (CAP), Loan to Deposit ratio (LDR), Bank Liquidation (LIQ), Management Effectiveness (CTI), Listed Bank (List) and Economic Growth (Ecogrow) 𝛼 ,γ,δ: Are the estimated coefficient vectors ε𝑖𝑡 :: Is the standard error 3.6 Methods of data analysis and processing 3.6.1 Methods of estimation 3.6.3 Testing the errors of the model 3.6.4 Handling endogenous phenomena of the model However, the weakness of the above regression models is unable to handle the potential endogenous phenomena in the model To solve this problem, previous studies have used instrumental variables (IV) estimation However, the problem arising when using the instrumental variable estimation is that it is often difficult to find the appropriate instrumental variables because if you choose weak instrumental variables, the IV estimation may be skewed (Mileva, 2007) In other words, using the IV estimation without choosing the appropriate instrumental variables, the problems of OLS estimation will not be improved Since then, the GMM dynamic panel data model is proposed to be used according to the research of Arellano and Bond (1991) One of the advantages of the GMM model over the instrumental variable estimation model is that it is easier for the GMM model to select instrumental variables because using exogenous variables at other time or taking the latency of the variables can be used as instrumental variables for endogenous variables at the present time Therefore, GMM has introduced many instrumental variables to easily achieve the condition of a standard instrumental variable (Overidentification of Estimators) Moreover, the estimation of Arellano and Bond are consistent with short panel data with small T time series (7 years) and large N (29 banks) Therefore, the GMM method introduced by Arellano and Bond (1991) will be used in this study Specifically, the data of the project is as follows: The first, after checking the data, it shows that the change of variable phenomenon has occurred for the research model To eliminate this phenomenon, the regression model is run with robust command in Stata software if it detects that this phenomenon occurs in the model The second, the author examines the multi-collinearity and finds that this was not a problem for the analysis of the topic through the results of the correlation coefficients between the variables and presented in the data content description The last, the relationship between Corporate Governance and bank risk 21 can occur as endogenous phenomena because of the possible causal relationship between Corporate Governance and bank risk (Lehn et al 2009; Wintoki et al, 2012) Therefore, it commonly selects FEM regression models to reduce endogenous problems in case the research does not find appropriate instrumental variables to handle (Cheung et al., 2010) Studies of Pathan (2009), Dong et al (2014), Chan et al (2016), Dong et al (2017, Moilah et al (2017) use the 2-step GMM method to measure the impacts of Corporate Governance on bank risk Therefore, in this study, the author uses the 2-step GMM analysis method to handle potential endogenous problems in the model of measuring the impacts of Corporate Governance on bank risk Studies of Mollah et al (2017), Kusi et al (2018) use the GLS method to measure the impacts of Corporate Governance on financial performance of banks Therefore, in the model to measure the impacts of Corporate Governance on financial performance of banks, the author uses the GLS analysis method for analysis Conclusion of chapter CHAPTER 4: STUDY RESULTS AND DISCUSSION 4.1 Actual situation of commercial banks in Vietnam in the period of 2011-2017 4.2 Descriptive statistics of study variables Table 4.2 Table of descriptive statistics of study variables Variable Observation number Z-Score 203 NPL Average value Standard deviation Minimum value Maximum value 29.9281 0.7711 0.5081 126.7510 203 0.0236 0.0142 0.0034 0.088 ROA 203 0.0063 0.0066 -0.0551 0.0253 ROE 203 0.0692 0.0847 -0.8200 0.2682 NIM 203 0.0256 0.0120 -0.0064 0.0742 Bsize 203 6.9891 0.2473 15 Bindep 203 0.1439 0.0710 0.4 Femdir 203 0.1794 0.1619 0.625 Fordir 203 0.0930 0.1251 0.4286 Execdir 203 0.1528 0.1271 0.4444 Edu 203 0.5391 0.2559 SIZE 203 89.349 1.0938 13.224 1.202.283 LAR 203 0.5284 0.1271 0.1473 0.7313 22 Variable Observation number CAP 203 LDR Average value Standard deviation Minimum value Maximum value 0.0970 0.04192 0.035 0.2384 203 0.8391 0.2015 0.3719 1.805 LIQ 203 0.1878 0.0959 0.0452 0.611 CTI 203 0.9880 6.0192 0.2875 86.3019 List 203 0.3448 0.4764 GDP 203 0.0608 0.0054 0.0525 0.0681 4.3 Analyzing the correlation between variables 4.4 Measuring the impacts of corporate governance on the risks of commercial banks in Vietnam in the period of 2011 - 2017 Table 4.4 Regression analysis results by the 2-step SGMM method Variable Z-Score NPL 0.8924 *** Z-Scoret-1 (0.000) 0.3082 *** NPLt-1 (0.000) -0.0613 -0.0014 Bsize (0.264) (0.601) -0.4723 ** -0.0197 Bindep (0.035) (0.158) 0.3121 *** -0.0043 ** Femdir (0.000) (0.028) 0.2316 ** 0.0002 Fordir (0.015) (0.954) -0.2592 ** -0.0017 Execdir (0.031) (0.646) 0.0275 -0.0018 Edu (0.746) (0.302) 0.1313 *** -0.0004 SIZE (0.000) (0.693) 0.3475** -0.0080 LAR (0.034) (0.360) 5.9788 *** 0.0764*** CAP (0.000) (0.007) -0.3608 ** 0.0066 LDR (0.000) (0.142) 0.0982 -0.0145 LIQ (0.625) (0.106) CTI -0.0144 0.0102** 23 Variable List GDP Constant AR(1) AR(2) Hansen test F-test Z-Score (0.856) 0.0334 (0.271) 6.2399 *** (0.001) -2.8070 (0.000) 0.050 0.661 0.203 0.000 NPL (0.021) 0.0034 ** (0.011) -0.5134 *** (0.000) 0.0501 (0.056) 0.003 0.223 0.245 0.000 Note: *, ** and *** are statistical significance at 10%, 5% and 1% respectively The suitability of regression by the SGMM method was assessed through F test, Hansen test and Arellano-Bond test (AR) The F test examines the statistical significance of the estimated coefficients Hansen test examines excessive constraints, the rationality of representative variables The AR test determines whether there is a residual correlation of the model In both models, the Hansen test with p-value of 0.203 and 0.245 respectively is greater than 0.1, so we accept the Hypothesis H0: the model is correctly defined, the representative variables are reasonable The F test in both models has p-value of 0.000 which is less than 0.01, so we reject the Hypothesis H0: all the estimated coefficients in the equation are equal to 0, or estimated coefficients of explanatory variables with statistical significance So both models are appropriate The AR test (1) of both models with p-value of 0.050 and 0.003 respectively, is less than 0.1, so we reject the Hypothesis H0: there is no first-degree line of correlation, that is, there is first-degree line of correlation The AR test (2) of both models with p-value of 0.661 and 0.223 respectively is greater than 0.1, so we accept the Hypothesis H0: there is no seconddegree correlation line in the residual of regression model 4.5 Measuring the impact of corporate governance on the financial performance of commercial banks in Vietnam in the period of 2011 - 2017 Table 4.5 (d) Results of regression analysis by the GLS method ROA ROE NIM Variable (p-value) (p-value) (p-value) 0.0010 0.0063 -0.0006 Bsize (0.362) (0.579) (0.755) -0.0031 -0.0302 -0.0147** Bindep (0.335) (0.412) (0.032) 0.0005 0.0093 -0.0056* Femdir (0.756) (0.631) (0.097) 24 Variable Fordir Execdir Edu SIZE LAR CAP LDR LIQ CTI List GDP Constant Wald chi2 ROA (p-value) -0.0021 (0.371) -0.0041** (0.039) 0.0013 (0.271) 0.0008 (0.129) 0.0002 (0.946) 0.0609*** (0.000) 0.0047*** (0.000) 0.0128*** (0.000) -0.0006*** (0.000) 0.0022** (0.023) 0.0650 (0.074) -0.0268 (0.008) 620.24 (0.000) ROE (p-value) -0.0191 (0.519) -0.0666*** (0.004) 0.0090 (0.487) 0.0188*** (0.002) 0.0633* (0.078) 0.1984** (0.046) 0.0362*** (0.013) 0.1857*** (0.000) -0.0100*** (0.000) 0.0209* (0.079) 0.8794** (0.025) -0.4464 (0.000) 1277.38 (0.000) NIM (p-value) 0.0036 (0.478) -0.0137*** (0.001) 0.0054** (0.037) -0.0014 (0.141) 0.0443*** (0.000) 0.0934*** (0.000) 0.0012 (0.662) 0.0223*** (0.001) -0.00009 (0.194) 0.0027 (0.118) -0.0678 (0.347) 0.0207 (0.257) 188.57 (0.000) Note: *, ** and *** are statistical significance at 10%, 5% and 1% respectively The regression results in Table 4.5 (d) have shown that the variables proposed in the model affecting the financial performance of commercial banks in Vietnam are the percentage of independent members of Board of Directors the percentage of female members of Board of Directors the percentage of members of Board of Directors taking part in management, the percentage of members of Board of Directors with postgraduate degrees, size of banks, size of loans, size of equity, percentage of outstanding loans of mobilized capital, liquidity accounts, management performance, listed banks and economic growth As for the Board of Directors size variables, the percentage of foreign members of Board of Directors is not statistical significance 4.6 Measuring the relationship between risks and financial performance of commercial banks in Vietnam in the period of 2011 - 2017 Table 4.6 (a) Regression analysis results of the impacts of risk on the financial performance of commercial banks by the GLS method 25 Variable Z-Score NPL Bsize Bindep Femdir Fordir Execdir Edu SIZE LAR CAP LDR LIQ CTI List GDP Constant Wald chi2 ROA (p-value) -0.0018*** (0.000) -0.0713*** (0.000) 0.0003 0.0014 (0.720) (0.174) -0.0055* -0.0034 (0.079) (0.258) 0.0019 0.0004 (0.252) (0.789) -0.0020 -0.0024 (0.391) (0.285) -0.0030 -0.0045** (0.127) (0.016) 0.0020* 0.0015 (0.098) (0.177) 0.0012** 0.0006 (0.024) (0.187) -0.0005 -0.0006 (0.859) (0.841) 0.0734*** 0.0652*** (0.000) (0000) 0.0050*** 0.0049*** (0.000) (0.000) 0.0121*** 0.0119*** (0.000) (0.000) -0.0007*** -0.0006*** (0.000) (0.000) 0.0020** 0.0024*** (0.032) (0.009) 0.0574 0.0214 (0.102) (0.555) -0.0278 -0.0204 (0.006) (0.035) 598.90 691.83 (0.000) (0.000) ROE (p-value) -0.0214*** (0.000) -0.5966*** (0.001) 0.0020 0.0067 (0.847) (0.540) -0.0610*** -0.0391 (0.100) (0.273) 0.0232 0.0085 (0.212) (0.654) -0.0387 -0.0151 (0.169) (0.601) -0.0596*** -0.0740*** (0.009) (0.001) 0.0190 0.0108 (0.125) (0.391) 0.0249 0.0182*** (0.000) (0.002) 0.0542 0.0592* (0.120) (0.090) 0.3447*** 0.2475** (0.001) (0.011) 0.0475*** 0.0351** (0.001) (0.014) 0.1810*** 0.1776*** (0.000) (0.000) -0.0107*** -0.0101*** (0.000) (0.000) 0.0218* 0.0225* (0.052) (0.057) 0.6299 0.5540 (0.104) (0.162) -0.4826 -0.4015 (0.000) (0.000) 1879.18 1401.06 (0.000) (0.000) NIM (p-value) -0.0012 (0.284) -0.0983*** (0.002) -0.0014 -0.0004 (0.512) (0.845) -0.0170** -0.0168** (0.014) (0.013) -0.0041 -0.0057* (0.242) (0.080) 0.0030 0.0038 (0.556) (0.431) -0.0125*** -0.0151*** (0.002) (0.000) 0.0058** 0.0054** (0.028) (0.034) -0.0011 -0.0016* (0.276) (0.086) 0.0433*** 0.0443*** (0.000) (0.000) 0.1041*** 0.0992*** (0.000) (0.000) 0.0015 0.0004 (0.564) (0.863) 0.0221*** 0.0219*** (0.001) (0.000) -0.0001 -0 0001 (0.137) (0.136) 0.0024 0.0028* (0.184) (0.082) -0.0734 -0.1488** (0.300) (0.044) 0.0198 0.0316 (0.281) (0.079) 178.92 212.72 (0.000) (0.000) Note: *, ** and *** are statistical significance at 10%, 5% and 1% respectively The regression results in Table 4.6 (a) have shown that the risk is inversely related to the financial performance of banks The results of this study are consistent with Bowman’s theory of risks and profits (1979) Table 4.6 (b) Regression analysis results of the impacts of financial performance on the risks of commercial banks by the GLS method Z-SCORE NPL Variable (p-value) (p-value) 26 Z-SCORE (p-value) Variable ROA -8.1374* (0.095) -0.5519*** (0.001) -1.1092** (0.015) ROE Bindep Femdir Fordir Execdir Edu SIZE LAR CAP LDR LIQ CTI List GDP Constant Wald chi2 -0.0513*** (0.000) -0.0922 (0.359) -0.6633** (0.014) 0.7174*** (0.000) 0.3205 (0.233) 0.1353 (0.454) 0.4951*** (0.000) 0.1788*** (0.001) -0.7039*** (0.008) 7.7409*** (0.000) 0.1766* (0.099) 0.0021 (0.994) -0.0364*** (0.000) -0.0909 (0.342) -3.6573 (0.245) -0.2545 (0.796) 253.69 -0.0748 (0.453) -0.6498** (0.014) 0.7273*** (0.000) 0.3517 (0.183) 0.0931 (0.606) 0.4802*** (0.000) 0.1844*** (0.000) -0.6321** (0.017) 7.3817*** (0.000) 0.1666 (0.122) 0.1309 (0.645) -0.0421*** (0.000) -0.0550 (0.564) -2.8692 (0.358) -0.4253 (0.664) 250.93 -2.1890 (0.276) -0.0759 (0.409) -0.4860** (0.045) 0.5470*** (0.000) 0.3670 (0.146) 0.1354 (0.399) 0.4760*** (0.000) 0.1318*** (0.010) -0.5818** (0.021) 7.5436*** (0.000) 0.1122 (0.236) -0.0798 (0.741) -0.0294*** (0.000) -0.0524 (0.593) -2.4902 (0.369) 0.5184 (0.578) 290.06 (0 000) (0.000) (0.000) NIM Bsize NPL (p-value) -0.0010 (0.695) -0.0089 (0.264) -0.0052 (0.252) -0.0010 (0.862) -0.0021 (0.710) 0.0029 (0.340) 0.0000 (0.955) -0.0059 (0.554) 0.1047*** (0.001) 0.0053 (0.205) 0.0043 (0.644) -0.0005*** (0.000) 0.0012 (0.575) -0.5142*** (0.000) 0.0463 (0.083) 106.37 -0.0014 (0.592) -0.0112 (0.159) -0.0063 (0.164) -0.0016 (0.771) -0.0024 (0.675) 0.0032 (0.295) 0.0004 (0.788) -0.0055 (0.574) 0.0664** (0.015) 0.0047 (0.244) 0.0046 (0.616) -0.0006*** (0.000) 0.0014 (0.506) -0.5031*** (0.000) 0.0452 (0.089) 110.88 -0.1159 (0.118) -0.0019 (0.487) -0.0097 (0.245) -0.0050 (0.290) 0.0047 (0.403) -0.0015 (0.799) 0.0035 (0.272) -0.0010 (0.435) -0.0017 (0.864) 0.0704** (0.017) 0.0021 (0.606) -0.0021 (0.828) -0.0001** (0.046) 0.0013 (0.555) -0.5416*** (0.000) 0.0745 (0.004) 88.72 (0.000) (0.000) (0.000) Note: *, ** and *** are statistically significant at 10%, 5% and 1% respectively The regression results in Table 4.6 (b) have shown that financial performance is inversely related to bank risk The results of this study are consistent with Bowman’s theory of risks and profits (1979) Conclusion of chapter 27 CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS 5.1 Conclusion The overall objective of the thesis is to study the impact of corporate governance on risks and financial performance of commercial banks in Vietnam in the period from 2011 to 2017 and at the same time the thesis also study Interactive relationship between risks and financial performance in the context of corporate governance To verify the hypotheses proposed in Chapter 3, after the process of analyzing and testing errors of the model, the thesis uses regression model and GLS method for the dependent variable of financial performance (measured by ROA, ROE and NIM) and SGMM method for the dependent variable of bank risk (measured by Z-Score and NPL) At the same time, the thesis uses regression model and GLS method to test the relationship between risks and financial performance of commercial banks in Vietnam The results of the thesis have answered the hypotheses in Chapter as follows: - For the dependent variable as risk: including bankruptcy risk (measured by Z-Score) and credit risk (measured by NPL): + Hypothesis H1a: The large size of the Board of Directors having a positive correlation with the bank’s Z-Score is rejected; we can conclude that the size of the Board of Directors has no impact on bankruptcy risk + Hypothesis H1b: The large size of the Board of Directors having negative correlation with the NPL of bank is rejected; we can conclude that the size of the Board of Directors has no impact on credit risk + Hypothesis H2a: The percentage of independent members in the Board of Directors having positive correlation with Z-Score of bank is accepted However, the research results in commercial banks in Vietnam are negatively correlated, which shows that the presence of independent members of the Board of Directors makes the members of Board of Directors reluctant to share information and lead to risk of bankruptcy of banks + Hypothesis H2b: The percentage of independent members in the Board of Directors having negative correlation with NPL of banks is rejected; we can conclude that the percentage of independent members of Board of Directors has no impact on credit risk + Hypothesis H3a: The high percentage of female members in the Board of Directors having positive correlation with Z-Score of banks is accepted; We can conclude that the greater the percentage of female members in the Board of Directors, the lower the bank’s risk of bankruptcy + Hypothesis H3b: The high percentage of female members in the Board of Directors having negative correlation with bank’s NPL is accepted; we can conclude that the larger the percentage of female members in the Board of Directors, the lower the bank’s credit risk 28 + Hypothesis H4a: The high percentage of foreign members in the Board of Directors having positive correlation with bank’s Z-Score is accepted; we can conclude that the greater the percentage of members of the Board of Directors being foreigners, the lower the bank’s risk of bankruptcy + Hypothesis H4b: The high percentage of foreign members in the Board of Directors having positive correlation with bank’s NPL is rejected; we can conclude that the percentage of foreign members has no impact on credit risk + Hypothesis H5a: The higher the percentage of members of Board of Directors taking part in management having negative correlation with bank’s Z-Score is accepted; We can conclude that the greater the percentage of members of the Board of Directors participating in the management, the greater the risk of bank bankruptcy + Hypothesis H5b: The percentage of members of Board of Directors taking part in management having negative correlation with NPL of bank is rejected; we can conclude that the percentage of members of Board of Directors taking part in management has no impact on credit risk + Hypothesis H6a: The percentage of members of Board of Directors with postgraduate degrees having positive correlation with bank’s Z-Score is rejected; we can conclude that the percentage of members of Board of Directors with postgraduate degrees has no impact on bankruptcy risk + Hypothesis H6b: The percentage of members of Board of Directors with postgraduate degrees having positive correlation with bank’s Z-Score is rejected; we can conclude that the percentage of members of Board of Directors with postgraduate degrees has no impact on credit risk This result has answered the objective and research question which factors of Corporate Governance are affecting risks of commercial banks in Vietnam At the same time, control variables such as bank size (SIZE) positively impact on Z-Score and don’t impact on NPL; lending activities size (LAR) positively impact on Z-Score and doesn’t impact on NPL; equity size (CAP) positively impact on Z-Score and NPL; Loan to Deposit ratio (LDR) negatively impact on Z-Score, and doesn’t impact on NPL; bank liquidity (LIQ) doesn’t impact on both Z-Score and NPL, management performance (CTI) positively impact on NPL and doesn’t impact on Z-Score; listed bank (List) positively impact on NPL and doesn’t impact on Z-Score; and economic growth (Ecogrow) positively impact on Z-Score and negatively impact on NPL - For the dependent variable is financial performance (measured by ROA, ROE and NIM): + Hypothesis H1c: The size of the Board of Directors positively impacting on the financial performance of the bank is rejected; we can conclude that the size of the Board of Directors doesn’t impact on financial performance (including variables: ROA, ROE and NIM) 29 + Hypothesis H2c: The high percentage of independent members of the Board of Directors positively impacting on the financial performance of the bank is partially accepted; we can conclude that the percentage of independent members of Board of Directors negatively impact on NIM However, the percentage of independent members of Board of Directors doesn’t impact on ROA and ROE variables + Hypothesis H3c: The percentage of female members in the Board of Directors positively impact on the financial performance of the bank is partially accepted; we can conclude that the percentage of female members of Board of Directors negatively impacts on NIM However, the percentage of female members of Board of Directors doesn’t impact on ROA and ROE variables + Hypothesis H4c: The percentage of foreign members of the Board of Directors positively impacting on the financial performance of the bank is rejected; we can conclude that the percentage of foreign members of Board of Directors doesn’t impact on financial performance (including variables: ROA, ROE and NIM) + Hypothesis H5c: The high percentage of the members of Board of Directors taking part in management negatively impacting on the financial performance of the bank is accepted in its entirety; we can conclude that the percentage of members of Board of Directors taking part in management negatively impacts on financial performance (including variables: ROA, ROE and NIM) + Hypothesis H6c: The percentage of members of Board of Directors with postgraduate degrees positively impacting on the financial performance of the bank is partially accepted; we can conclude that the percentage of members of Board of Directors with postgraduate degrees positively impacts on NIM However, the percentage of members of the Board of Directors with postgraduate degrees doesn’t impact on ROA and ROE variables This result has answered the objective and research question of which factors of Corporate Governance impact on the financial performance of commercial banks in Vietnam At the same time, control variables such as bank size (SIZE) positively impacts on ROE and doesn’t impact on ROA and NIM; the size of lending activities (LAR) positively impacts on ROE and NIM, doesn’t impact on ROA; Equity size (CAP) positively impacts on all ROA, ROE and NIM; the ratio of outstanding loan to deposit (LDR) positively impacts on ROA and ROE and doesn’t impact on NIM; Bank liquidity (LIQ) positively impacts on both ROA, ROE and NIM; management performance (CTI) negatively impacts on ROA and ROE, doesn’t impact on NIM, listed banks (List) positively impacts on ROA and ROE, doesn’t impact on NIM; and economic growth (Ecogrow) positively impacts on ROE and doesn’t impact on ROA and NIM 30 - For the interaction relationship between risks and financial performance: the research results show that there exists a relationship between risks and financial performance of commercial banks in Vietnam in the period of 2011 - 2017, specifically the inverse relationship 5.2 Academic contributions This topic contributes to the academic profile related to theoretical and practical issues about corporate governance, bank risk, and financial performance, the impact of corporate governance on risk and financial performance of banks in the world and in Vietnam Therefore, the research results will make certain contributions to complete the analytical framework of the impact of corporate governance on the bank’s risk and financial performance The found results of the study are completely consistent with the representative theory (size of the Board of Directors, independent members of Board of Directors, female members of Board of Directors, foreign members of Board of Directors, members of Board of Directors taking part in management), with theory of dependence resource (members of Board of Directors having postgraduate degrees) The paradox theory of risk and return (risk having negative correlation with financial performance) The research measures and determines the impact of corporate governance on risks and financial performance of commercial banks in Vietnam At the same time, the thesis has provided experimental evidence that exists the interaction relationship between risks and financial performance of commercial banks in Vietnam The banking industry is characterized by many potential risks, which shows that it is extremely necessary to introduce risk management measures The research results are also a useful reference for strategic planning as well as in-depth study on this topic In addition, the research results of the project can serve as a reference for bank managers to make reasonable decisions, bring high performance and minimize risks to banks, at the same time, help policy makers have more documents to make decisions on managing banks in Vietnam to develop safely, effectively and compete with foreign banks in the international integration context 5.3 Policy implications 5.3.1 About improving corporate governance capacity 5.3.2 Regarding risks and financial performance in commercial banks in Vietnam 5.3.3 For state management agencies 5.4 Limitations of research and subsequent research directions Although there are certain contributions in both theory and practice, the thesis also has certain limitations: First, because in period of the author’s research from 2011 to 2017 to have many weak banks and in the stage of merger, consolidation, and special control in the Vietnamese banking system, it is limited in data and has small observation samples From the above 31 characteristics, the study also has no conditions to review data of banks before and after the merger Second, there is no in-depth study of Corporate Governance issues in foreign banks, jointventure banks and non-bank credit institutions Third, when bank risk is analyzed, the thesis only applies bankruptcy and credit risks Therefore, it is better to consider other types of risks such as: overall risk, interest rate risk, market risk, operational risk, etc At the same time, when analyzing the financial performance of the bank, the thesis only uses ROA, ROE and NIM scales being collected from financial statements This source of information is of a timely nature and more or less assumed that this information is adjusted to the bank’s business strategy Therefore, it is better to take into account the financial performance scales according to market approach Final, because the objective of the thesis only considers one-way about the impact of corporate Governance on risks and financial performance of the bank, the topic has not fully studied two-way relationship To overcome this limitation, the author proposes the next research direction to be a longterm, wider-range research or to use additional data of pre-restructuring and postrestructuring periods At the same time, use the risk scales and financial performance to be more diverse LIST OF THE AUTHOR’S WORKS Pham Hoang An, 2019, Corporate Governance and Financial Performance of Banks: Evidence from Vietnam, The 2nd International Conference on Contemporary Issues in Economics, Management and Busines (2nd CIEMB 2019), NEU Publishing House, 296-312 Phạm Hoàng Ân, 2019, Tác động quản trị công ty đến rủi ro ngân hàng thương mại Việt Nam, Tạp chí Cơng Thương, số (tháng 4-2019), 274-279 An H Pham, Cuong K Q Tran, & Loan K T Vo, 2019, Determinants of Net Interest Margins in Vietnam Banking Industry, Beyond Traditional Probabilistic Methods in Economics ECONVN 2019 Studies in Computational Intelligence, vol 809 Springer, 417-426 (Scopus) An H Pham, Loan K T Vo & Cuong K Q Tran, 2018, The Impact of Ownership on Net Interest Margin of Commercial Bank in Vietnam, Econometrics for Financial Applications ECONVN 2018 Studies in Computational Intelligence, vol 760 Springer, Cham, 744-751, (Scopus) Phạm Hoàng Ân, 2018, Tác động tự hoá lãi suất đến lợi nhuận ngân hàng thương mại Việt Nam, Tạp chí Kinh tế dự báo, số (679), tr.3-6 ... Vietnam - Testing the impact of CG on financial efficiency of commercial banks in Vietnam - Proposing a number of policy implications to improve the CG management capacity, limit risks and improve... ROA; Equity size (CAP) positively impacts on all ROA, ROE and NIM; the ratio of outstanding loan to deposit (LDR) positively impacts on ROA and ROE and doesn’t impact on NIM; Bank liquidity (LIQ)... positively impacts on both ROA, ROE and NIM; management performance (CTI) negatively impacts on ROA and ROE, doesn’t impact on NIM, listed banks (List) positively impacts on ROA and ROE, doesn’t impact