The Impact of Foreign Ownership on Profitability Ratio: The Case of Vietnamese Commercial Banks

Abstract

The article aims to determine the impact of foreign ownership on profitability of 22 Vietnamese commercial banks over the period of 2009 - 2019. The regression results by feasible generalised least square (FGLS) method show that foreign ownership (FO) in general and foreign group ownership (FO2) in particular have positive impacts on ROA, but there is no evidence for the impact of FO on ROE. In addition, the study also shows that equity ratio and credit growth have positive effects on ROA but the operating expenses ratio has an opposite effect on ROA. However, the study find that bad debt and inflation are not associated with ROA. Moreover, credit growth and inflation have positive effects on ROE while equity ratio and operating expense ratio have opposite effects on ROE. Besides, bad debt has no impact on ROE. Based on empirical evidence, several policy implications are proposed for bank managers in particular and state management agencies in general for enhancing profitability of Vietnamese commercial banks.