Ownership structure and business performance of Vietnamese commercial banks - 2

ownership structure to the business performance of Vietnamese commercial banks. Thereby reinforcing theoretical schools and views on the role of ownership structure in the business performance of commercial banks.

In practice, the topic provides a specific view of the impact of ownership structure on the business performance of Vietnamese commercial banks. The results from the study serve as a reference for policy makers as well as administrators to make good policies and decisions to improve the business performance of Vietnamese commercial banks.

1.5. Planned structure of the topic Chapter 1:  Introduction of the topic

Chapter 2:  Overview of ownership structure and business performance

of NHM.

Chapter 3:  Research methods and research models

Chapter 4:  Research results and discussion

Chapter 5:  Conclusion and policy implications

Conclusion Chapter 1

Through Chapter 1, the author gave an overview of the research content of this topic. Especially 4 research questions posed for the topic. In the following, the author will implement the topic by looking for answers to the research questions in the next chapters.


2.1. Business performance of commercial banks

2.1.1. Business activities

As we all know, the birth and development of commercial banks is associated with the development of the commodity economy. Along with the strong development of the market economy in the era of globalization, commercial banks have rapidly transformed from simple and primitive business organizations to modern commercial banks, financial corporations, etc. giant, multinational. There are many different definitions of commercial banks, but in general, commercial banks are an intermediary financial institution, acting as a bridge between the savings sector and the investment sector in the economy. In other words, a commercial bank is an organization dealing in money, mobilizing capital from individuals and organizations in the economy, then making loans or investing in other potentially profitable assets. provides many financial, credit and payment services to organizations and individuals in the economy.

From the above definition, it can be seen that commercial bank is a financial institution that plays an important role in the economy. The role of this commercial bank can be summarized in the following aspects:

As a financial intermediary, commercial banks perform the function of converting savings into credits for individuals and business organizations to carry out investment and business activities. At the same time, commercial banks are one of the most important players in the government-issued bond market to create investment sources for public projects.

With the role of payment, commercial banks make payments to parties buying and selling goods and services through the issuance and payment of checks, providing an electronic payment network...

As a guarantor, commercial banks issue certificates of commitment to fulfill financial obligations and make payments to parties to business contracts.

As an agent, commercial banks perform the function of management and underwriting or repurchase of securities for partners.

Finally, the role of implementing policies of the state, commercial banks are an important channel to implement monetary policy and other macro policies of the state in order to contribute to promoting economic growth and realizing the objectives of the State. community spending.

2.1.2. Business performance of commercial banks Concept

Efficiency is a term widely used in many fields such as economic, technical, and social. Each different field, when considered from different angles, different research objectives will have different concepts of effectiveness. For example, in the economic field, efficiency is often seen as profit; In the field of engineering efficiency is often associated with the ability to create products and the loss of inputs; In the social domain, efficiency is an indicator of human and social development, often seen as unemployment rate, poverty reduction, literacy rate, social justice... Within limits and research objectives, this study only considers the viewpoints of efficiency from an economic perspective.

According to the European Central Bank, efficiency is “the ability to generate sustainable profits, the profits of which are first used to hedge against unexpected losses and strengthen capital positions, improve future returns through investment and retained earnings”.

According to Draft (2008), business performance is the conversion of scarce inputs into higher profits or reduced costs compared to competitors.

According to Farrell (1957), efficiency is expressed through the relationship between variables

output relative to the input variables used to generate it.

According to the dictionary "Econometrics, statistics, econometrics" by Nguyen Khac Minh, economic efficiency is "the correlation between scarce inputs and outputs of goods and services". “efficiency concept that considers how well resources are distributed by markets”.

In general, there are many different views on efficiency, but in general, business performance is the degree of success that investors have in using inputs to generate inputs. out, to meet a predetermined goal. Accordingly, from an economic perspective, the business performance of commercial banks is the profit obtained corresponding to the capital invested. Evaluation Criteria

Because there are many perspectives on effectiveness, there are also different methods of evaluating effectiveness. Currently, in the world, there are two main methods commonly used to evaluate the business performance of commercial banks: the method based on financial criteria and the method based on the model. Starting from the research model, this thesis focuses on examining the method of evaluating business performance of commercial banks based on financial criteria.

- Method of evaluating business performance based on financial indicators

According to Tran Van Tho et al (2007), the criteria for assessing business performance based on financial criteria can be divided into two groups, which are relative business efficiency and absolute business efficiency:

 The relative business performance evaluation criteria can be expressed in static form or in dynamic form.

 Static relative efficiency is determined by the formula:

Operational efficiency



Business results

Cost to achieve results

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Ownership structure and business performance of Vietnamese commercial banks - 2


Economic performance



Cost to achieve results

Business results

 Dynamic relative efficiency index is determined according to the formula:

Economic performance



Increase in business results

Cost increase

The business performance indicators are relatively convenient for comparison over different periods and sizes, such as allowing comparison of business performance between commercial banks with different sizes of total assets, different equity, or comparison. compare them in different time periods of the same commercial bank.

 The criteria to evaluate the absolute business efficiency of commercial banks are determined according to the following general formula:

Economic performance



Business results


Cost to achieve

get that result

Gross profit = Net sales – Cost of goods sold

Operating profit = Gross profit – Total operating expenses

Net profit = Operating profit – Tax – Profit

The absolute business performance indicators are used to evaluate the business performance of commercial banks in both depth and breadth. The most commonly used absolute business performance metrics are gross profit, operating profit and net profit. However, it is not used to make comparisons between commercial banks with different capital and asset sizes. For example, commercial banks with large total assets and equity have greater profits than commercial banks with smaller total assets and equity. Based on this, we cannot assume that commercial banks with larger total assets and owners' equity have higher business performance than commercial banks with smaller total assets and equity. Thus, business performance indicators absolutely do not reflect the ability to economically use or waste inputs.

In summary, as well as the point of view on effectiveness, effectiveness evaluation criteria are also very diverse and depend on different perspectives, requirements and research objectives. In this essay, the author uses data of many commercial banks with different sizes and characteristics for analysis. Therefore, in order for the indicators to evaluate business performance to be comparable among commercial banks, the essay only uses the criteria for evaluating business performance in the relative group.

The following section will detail some common business performance evaluation criteria belonging to the relatively static group, often used to evaluate the business performance of commercial banks. At the same time, these indicators are also measures of business performance that will be used in this essay.

 The indicators of profitability are relatively static

These indicators evaluate the efficiency of using a business capital unit. In the world, the following criteria are often used: return on total assets, return on total equity, interest income on total assets.

assets, non-interest income to total assets, earnings per share. How to calculate these indicators are presented in detail below.

Return on Assets (ROA)


Profit after tax


total assets

Return on assets (ROA) is an important indicator widely used to evaluate business performance. ROA represents a manager's ability to generate profit using a unit of asset value. It reflects the capacity of commercial bank managers in using assets to convert into profit after tax.

Return on Equity (ROE)


Profit after tax



Return on equity (ROE) is another important indicator that evaluates the ability of commercial banks to earn profits for shareholders. It represents the return that shareholders receive per unit of capital invested in commercial banks. ROE is also widely used in business performance analysis to assess the efficiency of using equity.

Interest income ratio

on total assets


Total interest income – Total interest expense

Total assets (or mobilized capital)

Ratio of external income

profit on total assets


Total non-interest income – Total non-interest expenses

total assets

Income after tax

per share


Profit after tax

Total number of common shares outstanding

The ratio of interest income to total assets represents the ability of a commercial bank manager to generate profit from interest when using a unit value of mobilized assets (or mobilized capital). The ratio of non-interest income to total assets reflects the ability of commercial banks' managers to generate non-interest income (service fees) when using a unit of asset value. After-tax income per share reflects the profit that shareholders receive when investing a share in a commercial bank.

In addition, in the analysis and evaluation of the business performance of commercial banks, the managers of commercial banks also analyze the relationship between the rate of return on total assets and the rate of return on equity. A commercial bank can have a low return on total assets but still be able to achieve a high return on equity by using large financial leverage.

 The management performance evaluation criteria belong to the relative group

With the goal of maximizing profits, commercial bank managers often improve business performance by improving the quality of human resources and applying technology to increase labor productivity. Therefore, the business performance of commercial banks is also reflected by the following criteria:

Investment efficiency of capital

mobilize (LOD)


total loans

Mobilized capital

LOD indicator reflects the ability of commercial banks' managers to use mobilized capital.

Ability to attract capital from the background

economic (LOE)


total loans


LOE indicator reflects the ability to attract capital from the economy as well as the ability to use equity of commercial bank managers.

Ability to offset costs


Total operating expenses

Total operating income

Effective use of human resources


Total operating income

Total staff

Efficient use of assets


Total operating income

total assets

Thus, in order to achieve the goal of maximizing profits and bringing efficiency in their business operations, commercial bank managers need to pay attention to the general analysis and reasonable control of indicators such as: return on total assets, return on equity, interest income on total assets, non-interest income on total assets, investment efficiency of mobilized capital, investment efficiency equity investment, ability to cover costs, efficient use of human resources, efficient use of assets.

To analyze and evaluate the business performance of commercial banks, in the world today, financial indicators are still commonly used because they are simple and easy to understand in analysis. However, its simplicity has become a difficult problem for commercial bank managers when they want to see the overall business situation of commercial banks. Because each indicator only reflects the proportional relationship between two specific variables, there is no indicator that generally reflects the business performance of a commercial bank. Therefore, when analyzing the general situation of a commercial bank, it is necessary to consider and analyze a series of criteria to have a comprehensive view of the business performance of commercial banks.

- Method of evaluating business performance based on the model:

Is the analysis and evaluation of business performance of commercial banks based on

into pre-built models. The model commonly used to evaluate the business performance of commercial banks today is DEA (Data Envelopment Alnalysis). The DEA was first developed by Charnes et al (1978). This study is inherited from Farrell's (1957). Accordingly, the DEA analyzes the efficiency based on the data envelope or the overall efficiency frontier built based on the input and output factors, thereby determining the efficiency level of each commercial bank compared with each other. with other commercial banks and compared to the whole. The topic only analyzes business performance based on financial indicators, so it does not delve deeper into this method. Factors affecting the business performance of commercial banks

Business performance is the goal of shareholders and managers of commercial banks, it determines the existence, development or bankruptcy of commercial banks. Improving business performance is also strengthening ensuring conditions for commercial banks to operate and develop.

In order to improve the business performance of commercial banks, commercial banks' managers need to identify the factors affecting the business performance of commercial banks in order to limit the negative impacts, promote the negative impacts of the commercial banks. positive. According to Nguyen Viet Hung (2008), these factors can be divided into two groups: the group of external factors and the group of internal factors. Depending on the specific conditions of each commercial bank, these two groups of factors have significant effects. have different effects on the performance of commercial banks themselves.

- Group of external factors

 Legal system

The strict, transparent, synchronous and complete legal system will create favorable conditions for businesses in general and commercial banks in particular to improve business performance and vice versa. Practices in the world have proven the importance

the importance of the legal system to the operation of the market economy. If the legal system is incomplete, transparent, synchronous and tight, it will not stimulate and even hinder the business process, reducing the business performance of commercial banks. Vietnam has an emerging economy, the legal system is still not tight, complete and synchronous, which is an obstacle to the business activities of commercial banks.

 Political environment

Commercial banks are also a business organization, so changes in the political environment will have an impact on the business activities of commercial banks. If the political environment is good, it will positively affect investment to expand production and business, thereby making commercial banks' business activities better. On the contrary, when the political environment is unstable, it will be detrimental to the business activities of commercial banks.

 Economic environment

The economic environment is most generally expressed through two indicators: economic growth (GDP growth) and inflation (INF). These two indicators have a great impact on the business performance of enterprises in general and commercial banks in particular.

When the economy grows (GDP grows), stably, investors expand production and business activities, making the demand for loans increase, interest rates increase, commercial banks have favorable conditions for credit growth and decrease. bad debt, improve business performance. On the contrary, when the economy is in recession, as the demand for loans decreases, the risk of overdue debts and bad debts increases, reducing the business performance of commercial banks.

Inflation (INF) is closely related to interest rates in the market and has an impact on economic growth. When inflation increases, investment will be expanded, interest rates will increase, making business performance increase accordingly. On the contrary, when inflation decreases, business efficiency will decrease.

Because two indicators of economic growth (GDP) and inflation (INF) clearly reflect,

most comprehensively cover the economic environment and have a great impact on business performance, so the author chooses as two macro variables in the research model of this topic.

- Group of internal elements

Internal factors are the main subjective factors in commercial banks such as technology level, quality of human resources, financial capacity, ownership structure, operating capacity...

 Technology level

The level of technology reflects the investment and application of advanced technology in the business activities of commercial banks. Today, science and technology are widely applied in all fields of production and business to improve labor productivity and quality of products and services. Commercial banks that want to stand firm and develop cannot be an exception, standing outside of this inevitable trend. The investment in new technology application will help commercial banks improve the quality of products and services, improve labor productivity to improve business efficiency, increase competitiveness to stand firm in the market.

 Quality of human resources

People always play a leading role in all social activities in general and in business activities of commercial banks in particular. The quality of human resources determines the business performance and survival of commercial banks. Human needs are limitless, customer requirements are not limited, so commercial banks are required to improve quality and create many new products and services. Therefore, commercial banks must constantly improve the quality of human resources to create a premise to improve quality and create new products and services to meet the increasing demands of customers. The use of human resources with professional ethics and expertise will help commercial banks create loyal customers, prevent possible risks in business activities, investment, and this. It is also a factor that helps commercial banks reduce

reduce operating costs while increasing labor productivity. Human resource development is always accompanied by technological development.

 Financial capacity

The financial capacity of a commercial bank is usually expressed first of all as its own capital, because its own capital is a manifestation of the financial strength of a commercial bank. The potential of equity capital has an impact on the business performance of commercial banks such as the ability to attract capital from the economy, the ability to lend, make financial investment as well as invest in improving the quality of human resources and improving the quality of human resources. improve the level of technology, ultimately it creates conditions for increasing revenue, reducing costs, reducing risks, and improving business efficiency of commercial banks.

 Management qualification

The level of management is a particularly important factor affecting the business performance of commercial banks. The level of governance manifests first in the structure of the operating apparatus, the professional qualifications and experience of the management team, and the ability to cope with the fluctuations of the business environment outside as well as inside the commercial bank. The level of management can be assessed by the criteria of the ability to save operating costs, the ability to use available inputs to create the highest profit. There are many indicators reflecting the management level of a commercial bank, but according to the author, the two indicators, the ability to attract capital from the economy (LOE) and the efficiency of mobilized capital investment (LOD) are two relative indicators. most obvious.

The capital draw from the economy (LOE) represents the amount of loan outstanding per unit of equity. It reflects the ability to mobilize capital from the economy to do business. In other words, this is an indicator that reflects the ability of commercial bank managers to use financial leverage. When this index is high, it will help commercial banks earn more interest from lending but at the same time increase the cost of capital mobilization and higher risk costs. This has the potential to increase or decrease the business performance of commercial banks.

The efficiency of mobilized capital investment (LOD) represents the outstanding loan amount per unit of mobilized capital or the ratio of loan outstanding to mobilized capital. LOD represents the ability to effectively use mobilized capital. When LOD is high, it reflects that commercial banks have high outstanding loans corresponding to low mobilized capital. This will lead to commercial banks earning high lending interest with low capital mobilization costs.

Because the two indicators LOE and LOD reflect quite clearly the ability of managers in commercial banks, the author chooses as two internal control variables in the research model of this topic.

 Ownership structure

Through the share holding ratio, the types of shareholders (state shareholders, foreign shareholders, natural shareholders) affect the personnel as well as the quality of the management team to operate commercial banks according to the principle of mutual respect. capital. From there, it affects all activities and goals of the commercial bank. This will definitely affect the business performance of commercial banks.

2.2. Ownership structure of commercial banks

2.2.1. The concept of ownership

According to the Marxist view, the original concept of property is "possession". Possession is always associated with things - the object of possession. At the same time, possession is not just an item, it is also a relationship between people about the item. It is the ownership of a subject (individual or organization) over a property that is recognized and protected by society.

According to Article 158 of the Civil Law, "Ownership includes the right to possess, use and dispose of the property of the owner in accordance with the law".

Thus, in this essay, ownership can be understood as the fact that shareholders (domestic and foreign organizations and individuals) hold shares (equity) in commercial banks recognized and protected by law. Each shareholder can hold shares at one

or many commercial banks and vice versa a commercial bank can have many shareholders holding shares.

Based on the characteristics, this essay divides shareholders into the following categories: State shareholders, foreign shareholders, natural shareholders, and legal entity shareholders. Corresponding to a type of shareholder is a type of ownership, that is: State ownership, foreign ownership, natural person ownership, and organizational ownership.

Through the percentage of shares held, shareholders affect the business process of commercial banks according to the principle of capital reciprocity.

2.2.2. The concept of ownership structure

According to Gursory & Aydogan (2002), ownership structure is represented by two characteristics: centralized ownership and mixed ownership.

According to Pedersen & Thomsen (1999), centralized ownership is the ownership of the investor who holds the most shares and bears the impact on monitoring costs and risks. According to Wen (2010), considering the degree of ownership concentration in private and state-owned commercial banks in China is the percentage of ownership of the largest shareholders.

According to Kiruri (2013), Wen (2010), Anstoniadis (2010), mixed ownership is the percentage of shares owned by groups of shareholders with different characteristics such as private ownership, foreign ownership outside, state ownership.

Thus, the ownership structure can be understood as the structure of the types of shareholders holding shares in commercial banks. It reflects the types of shareholders and the share holding ratio of each type of shareholder in the same commercial bank.

2.2.3. Types of ownership

In this thesis, the author relies on the characteristics of shareholders to divide into the following types of ownership: State ownership; Ownership of natural persons; Ownership of a Legal Person; Department

Date published: 09/04/2022
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