Impacts of Foreign Ownership and Foreign Bank Presence on Commercial Bank Efficiency: Evidence from Vietnam

Abstract

The article aims to investigate the impacts of foreign ownership and foreign bank presence on commercial bank efficiency as measured by three financial ratios: ROA (return on assets), ROE (return on equity) and NIM (Net Interest Margin). Research data is collected from 29 commercial banks in the period 2009-2020. We use least squares method (OLS), fixed effects method (FEM), random effects method (REM) and feasible general least squares (FGLS), then chose the best method. The results using FGLS method show that, the presence of foreign banks (FBANK) has a negative impact on commercial bank efficiency. However, there is not enough evidence for the impacts of foreign ownership (FOW) and economic growth (GDP) on efficiency. In adition, our findings indicate that credit growth (LGR), bank size (SIZE) and inflation (INF) have positive impacts on bank efficiency as measured by ROE, ROA and NIM. Besides, the “bad debt” (NPL) has a negative impact on ROA and ROE while capital structure (TDTA) also has a negative impact on ROA and NIM. Liquidity (LIQ) has a positive effect on NIM but reserve requirement (RR) has an opposite effect on ROE.