Effect of Corporate Governance on Banking Performance: Evidence from Vietnam

Abstract

This research investigated the causal relationship between corporate governance and banking performance of banks in Vietnam. The research tried to review and establish the hypotheses on the influence of corporate governance dimensions on banking performance. The research sample of the study consists of 78 usable firm-year observations selected from 25 publicly listed banks in Vietnam over a 4-year period from 2015 to 2018. The three mechanisms of corporate governance were chosen for research analyses, which are the duality of the chief executive officer and chairman, the percentage of independent executives in the managerial board and the size of the managerial board. Banking performance is measured based on ROA. The empirical results show statistical evidence on the causal links from corporate governance to banking performance, where the duality of the chief executive officer and chairman negatively affects banking performance, the percentage of independent executives in the managerial board positively influences banking performance and the size of the managerial board positively affects banking performance. The empirical findings are useful to banking executives in their business decisions on the choice of suitable mechanisms of corporate governance that can help to develop and maintain competitive advantages for banks that therefore achieve the best possible banking performance.