Ownership structure and business performance of Vietnamese commercial banks

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMY HO CHI MINH CITY

NGUYEN QUANG TUAN

OWNERSHIP STRUCTURE AND BUSINESS EFFICIENCY OF VIETNAM COMMERCIAL BANK

Major: Finance - Banking (Banking) Code: 8340201

MASTER THESIS OF ECONOMY

Science instructor:

Dr. NGUYEN THANH PHONG

GUARANTEE

My name is Nguyen Quang Tuan, a graduate student of course 26, majoring in banking, Ho Chi Minh City University of Economics.

I hereby declare that the thesis "Ownership structure and business performance of Vietnamese commercial banks " is my own research work under the guidance of Dr. Nguyen Thanh Phong. The data and results stated in the thesis are honest and have never been published in any other research work.

City. Ho Chi Minh, February 14, 2019

Thesis author

Nguyen Quang Tuan

TABLE OF CONTENTS

Side page cover Statement of Contents

List of abbreviations List of tables

List of Charts Summary - Abstract

CHAPTER 1: INTRODUCTION TO THE TOPIC 1

1.1. Reason and urgency to implement the topic 1

1.2. Objectives and research questions 2

1.2.1. Research Objectives 2

1.2.1.1. Overall goal 2

1.2.1.2. Specific goal 2

1.2.2. Research Question 3

1.3. Research object and scope 3

1.3.1. Research object 3

1.3.2. Research scope 4

1.3.2.1. Space Range 4

1.3.2.2. 4 . time range

1.4. Meaning of topic 4

1.5. Projected structure of the topic 5

CHAPTER 2: OVERVIEW OF OWNERSHIP STRUCTURE AND BUSINESS PERFORMANCE OF commercial banks 6

2.1. Business performance of commercial banks 6

2.1.1. Business activities 6

2.1.2. Business performance of commercial banks 7

2.1.2.1. 7 concept

2.1.2.2. Evaluation criteria 8

2.1.2.3. Factors affecting the business performance of commercial banks 14

2.2. Ownership structure of commercial banks 18

2.2.1. The concept of ownership 18

2.2.2. The concept of ownership structure 19

2.2.3. Types of ownership 19

2.2.3.1. State ownership 20

2.2.3.2. Possessing natural persons 20

2.2.3.3. Foreign ownership 20

2.3. The relationship between ownership structure and business performance 20

2.3.1. State ownership and business performance 21

2.3.2. Foreign ownership and business performance 24

2.3.3. Ownership of natural persons and business performance 25

2.4. Empirical evidence on the relationship between ownership structure and business performance of commercial banks 25

2.4.1. State ownership and business performance of commercial banks 26

2.4.2. Foreign ownership and business performance of commercial banks 27

2.4.3. Private ownership and business performance of commercial banks 30

CHAPTER 3: RESEARCH METHODS, RESEARCH MODEL 31

3.1. Research Methods 31

3.1.1. 31 . Qualitative Method

3.1.2. Quantitative method 31

3.2. Research Model 31

3.3. Procedure 33

3.4. Research data 34

CHAPTER 4: RESEARCH RESULTS AND DISCUSSION ... 35

4.1. Qualitative research results 35

4.1.1. 35 . ownership structure

4.1.2. Business efficiency 40

4.1.3. Assessment of ownership structure and business performance 43

4.1.4. Descriptive Statistical Analysis 44

4.2. Quantitative research results 44

4.2.1. Test for multicollinearity 44

4.2.2. Preliminary regression results and test results 46

4.2.3. Regression results and overcoming the violation of statistical hypothesis 47

4.2.4. Summary of 48 . regression results

CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS 52

5.1. Conclusion 52

5.2. Policy Implications 53

5.2.1. Increase ownership rate for foreign investors in Vietnamese commercial banks 53

5.2.2. Reducing state ownership rate in state-owned commercial banks 54

5.2.3. Need a suitable roadmap in expanding foreign ownership in Vietnamese commercial banks 55

5.2.4. Strengthening Legislation 56

5.2.5. Actively apply Basel II 57 . standards

5.2.6. Improve management level, technology and quality of products and services

................................................. ................................................. .........57

5.2.7. Creating an equal business environment among commercial banks 58

5.3. Limitations of the topic 58

5.4. Recommendations for further research 59

References Appendix

LIST OF ACRONYMS

Acronyms	Full name in Vietnamese	Full English name
DEA	Performance analysis model based on data envelope	Data Envelopment Alnalysis
FEM	Fixed effects regression model	Fix Effects Model
FOE	Foreign ownership ratio	Foreign On Equity
GDP	Gross Product Growth Index domestic	Gross Domectic Product
GLS	The method of square estimation smallest generalization	Generalized Least Squares
GOE	State ownership ratio	Government On Equity
INF	Inflation Index	Inflate
IOE	Rate of ownership of natural persons	Individual On Equity
LOD	Effectiveness of mobilized capital investment	Loan On Deposits
LOE	The ability to attract capital from the economy	Loan On Equity
NH	Commercial Bank	Commercial bank
OLS	The method of square estimation smallest	Ordinary Least Squares
Pooled	Pooled data regression model	Pooled
REM	Random effects regression model	Random Effects Model
ROA	Ratio of profit after tax to total asset	Return On Assets
ROE	Return on equity	Return On Equity
TMCP	Stock Commercial	Joint Stock Comercial
LTD	Limited	Limited
VIF	Multiplier magnifies the variance	Variance Iflation Factor
WTO	World Trade Organization	World Trade Organization

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Table number	Table name	Number of pages
Table 3.1	Summary of variables in the research model	32
Table 4.1	Mergers and acquisitions of commercial banks since 2010 to 2017	37
Table 4.2	Ownership structure of 30 commercial banks selected for research from 2002 to 2017	39
Table 4.3	Statistics table of business performance of 30 Commercial banks were selected for research from 2002 to 2017	41
Table 4.4	Sample descriptive statistics results	44
Table 4.5	Variable Correlation Matrix	45
Table 4.6	Magnification Factor Synthesis (VIF)	45
Table 4.7	Regression results according to Pooled, REM, FEM and . models test results of model selection, test of variance, test of autocorrelation	forty six
Table 4.8	Regression results and variance correction change, automatically correlate	47
Table 4.9	Sum of the results of regression and testing	48

Number	Chart name	Number of pages
Graph 4.1	Changes in ownership types of 30 commercial banks selected for research from 2002 to 2017	40
Graph 4.2	The fluctuation of profit after tax of 30 commercial banks is choose to study from 2002 to 2017	42
4.3 . chart	The fluctuation of return on total assets (ROA) of 30 commercial banks selected for research since 2002 until 2017	42
4.4 . chart	Changes in ownership structure and return on assets (ROA) of 30 selected commercial banks research from 2002 to 2017	43

"The impact of ownership structure on business performance of Vietnamese commercial banks"

Vietnam is in the process of divesting state-owned enterprises and opening its doors to foreign investors. Therefore, studying the ownership structure and business efficiency of Vietnamese commercial banks is an urgent issue today.

Previous studies only generally studied the impact of ownership structure on business performance of Vietnamese companies. This study specifically studies the impact of each type of ownership on the business performance of Vietnamese commercial banks.

Carrying out the research, the author collects data on 30 Vietnamese commercial banks from 2002 to 2017, and uses multiple linear regression models to estimate the impact of each type of ownership on the business performance of Vietnamese commercial banks. Male.

The estimated results show that state ownership has a positive correlation, foreign ownership has a negative correlation, and ownership of natural persons has not been found to correlate with business performance of Vietnamese commercial banks.

The results of this study serve as a basis for the state and administrators to make decisions about the optimal ownership structure to improve the business performance of commercial banks. Further studies need to expand the research sample, find the impact of private ownership on the business performance of Vietnamese commercial banks.

Keywords: Ownership structure, business efficiency

Abstract:

'Impact of ownership structure on business performance of Vietnamese commercial banks'

Vietnam is in the process of diving from government-owned enterprises and opening its doors to foreign investors. Therefore, studying the ownership structure and business performance of Vietnam commercial banks is an urgent issue.

Previous studies only focused on the impact of ownership structure on the business performance of Vietnamese companies. This topic specifically studies the impact of each type of ownership on business performance of Vietnamese commercial banks. Conducting research, the author collected data of 30 Vietnamese commercial banks from 2002 to 2017, and used multiple linear regression models to estimate the impact of each type of ownership on business performance of Vietnamese commercial banks.

Estimated results show that government ownership is positively correlated, foreign ownership is negative correlation, private ownership is not correlated with business performance of Vietnamese commercial banks.

The results of this study provide the basis for the government and commercial bank managers to make decisions on optimal ownership structure to improve business efficiency of commercial banks. Further studies need to expand the research sample, find the impact of private ownership on business performance of Vietnamese commercial banks.

Keywords: Ownership, business performance

CHAPTER 1: INTRODUCTION TO THE TOPIC

1.1. Reason and urgency to implement the topic

Restructuring the banking system is an issue that has received a lot of attention from market development policy makers, investors and commercial banks. When implementing restructuring, a prominent issue that is particularly noticeable is the ownership structure in commercial banks today. Theory, empirical evidence in the world as well as practice in Vietnam have shown the importance of ownership structure to the business performance of commercial banks. Studying the relationship between ownership structure and business performance of commercial banks in Vietnam has great practical significance for three reasons:

Firstly, Vietnam's economy is based on the banking system instead of the market, so the banking system plays a dominant role in allocating capital to the economy.

Second, an outstanding feature of the Vietnamese economy is the dominant role of state ownership in many fields, including banking.

Third, the trend of opening up and integrating with the world is inevitable, Vietnam must also open up the banking industry to foreign investors. How much foreign ownership ratio is optimal for Vietnam's banking industry.

Therefore, research on the impact of ownership structure in general and the impact of ownership types in particular on the business performance of commercial banks will help provide policy implications on limiting or encouraging Encourage different forms of ownership with the goal of adjusting the ownership structure of commercial banks towards the optimal ownership structure, increasing business efficiency of commercial banks, thereby helping to develop the financial market as well. like the economy. In addition, although there have been many studies on the impact of ownership structure on the business performance of companies in Vietnam, these studies mainly consider

case of non-financial companies while very few studies exploit this issue in terms of the commercial banking system. Therefore, studying the impact of ownership structure on business performance of Vietnamese commercial banks is an urgent issue today. The research results will contribute to the academic treasure trove of empirical evidence on this issue in Vietnam with its own characteristics, thereby helping to broaden understanding of the role of ownership structure of Vietnamese commercial banks. and provide useful policy implications.

The results from this study have both academic and practical implications. In the academic aspect, the topic contributes empirical evidence on the role of ownership types in the business performance of Vietnamese commercial banks. In addition, for the practical aspect, the results from the study help provide the basis for policy implications related to the ownership structure of commercial banks in order to sustainably develop the financial system. that promotes economic growth.

With the reasons and urgency mentioned above, I chose to carry out the topic "Ownership structure and business performance of Vietnamese commercial banks"

1.2. Objectives and research questions

1.2.1. Objectives of the study

1.2.1.1. Overall objectives

The overall objective of the study is to analyze the impact of ownership structure on the business performance of Vietnamese commercial banks. Based on the research results, to provide policy suggestions and solutions on ownership structure to contribute to improving the business performance of Vietnamese commercial banks.

1.2.1.2. Detail goal

- Analyzing business operations and business performance of commercial banks.

- Factors affecting the business performance of commercial banks.

- Analysis of the current state of ownership structure of Vietnamese commercial banks.

- Assess the current status of ownership structure and business performance of Vietnamese commercial banks.

- Analyze the impact of each type of ownership on the business performance of Vietnamese commercial banks.

1.2.2. Research question

To achieve the research objective of the topic, the author through finding answers to the following research questions:

Question 1: In addition to factors belonging to the economic environment and internal factors of commercial banks, how does the ownership structure of commercial banks affect the business performance of commercial banks?

Question 2: What is the change in ownership structure and business performance of Vietnamese commercial banks in recent years?

Question 3: If the ownership structure has an impact on the business performance of Vietnamese commercial banks, what is the impact of each type of ownership (State ownership, foreign ownership, natural person ownership) on the efficiency of the business? How is the business performance?

Question 4: What solution is needed to control the ownership structure, contributing to increasing business efficiency of Vietnamese commercial banks?

1.3. Object and scope of the study

1.3.1. Research subjects

The object of the research is the ownership structure, business performance and the impact of ownership structure on the business performance of commercial banks in Vietnam. Within the scope of this thesis, the author only studies the effect

business activities in terms of asset efficiency and can be easily compared between commercial banks. Accordingly, the author chooses the specific business performance in this research as the rate of return on total assets (ROA).

1.3.2. Research scope

1.3.2.1. Spatial scope

This study uses data from 30 commercial banks in Vietnam. These commercial banks ensure the operation requirements during the research period and guarantee the representative of Vietnamese commercial banks until the time of the study. The list of commercial banks selected to collect research data is in Appendix 1.

1.3.2.2. Time range

Research data is compiled by the author from reliable sources such as Bankscope; Orbis; Annual report; Prospectus and macro-statistical data of the General Statistics Office for the period from 2002 to 2017 (16 years). This data includes the period when Vietnamese commercial banks were affected by the world financial crisis (2008/2009). Since being affected by the world economic crisis, the Government of Vietnam and administrators have made many adjustments in policies, management and operation of Vietnamese commercial banks to overcome existing weaknesses. , where in particular is the issue of ownership structure. This time range ensures reliability as a basis for analyzing the impact of ownership structure on business performance of Vietnamese commercial banks.

1.4. Meaning of the topic

Research on ownership structure and business performance of Vietnamese commercial banks is an urgent issue. The results from this study have implications from both academic and practical perspectives.

Academically, the topic provides an empirical evidence on the impact of structural