Globalisation and Bank Performance in Vietnam

Abstract

The purpose of this study is to shed some crucial light on the relationship between globalisation and profitability of the banking system in Vietnam. We use a range of bank-characteristic determinants, country-specific factors and three different dimensions of globalisation including economic globalisation, social globalisation and political globalisation to explain bank performance. Using the random effect model based on secondary data for commercial banks in Vietnam from 2007-2014, we find evidence that the actual flow index and the restriction index have significant and positive effects on bank profitability, while the cultural proximity and political indexes show significant and negative impacts. Therefore, Vietnamese banking regulators should widen the openness of the banking sector to attract more foreign investors and improve global competitiveness. Banks are also recommended to develop their credit risk management, diversify products and services, expand their network along with enhancing management practices, and improve forecasting of macroeconomic fluctuations in order to achieve greater efficiency levels.