Board Characteristics and Bankruptcy Risk: Differences in the Ownership Structure of Vietnamese Commercial Bank

Abstract

The article aims to evaluate the impact of board of director (BOD) characteristics on bankruptcy risk and examine the moderating role of state ownership in this relationship. Using the SGMM estimation method to handle the endogenous phenomenon of the model based on balanced panel data generated from the financial statements of 25 Vietnamese commercial banks from 2012 to 2022, the research results show that many characteristics of the BOD reduce the bank's bankruptcy risk, including the size of the BOD, the educational level of board members, the CEO's dual responsibility on the BOD, and women's participation on the BOD. On the contrary, the independence of the BOD is a factor that increases bankruptcy risk. The moderator variable results show state ownership's positive role in reducing bankruptcy risk. Specifically, banks with state ownership and large BOD have a lower risk of bankruptcy; the education level positively affects bankruptcy risk in state-owned banks more strongly than in non-state-owned banks. The dual responsibility of CEOs in state-owned banks has a more substantial positive impact in reducing the risk of bankruptcy. The research results help recommend an effective BOD structure, assisting banks to stabilize and reduce the risk of bankruptcy.