Corporate Governance and Financial Stability: The Case of Commercial Banks in Vietnam

Abstract

Bank stability is a goal that bank managers aim for in addition to the goal of maximizing shareholder value. To achieve this goal, commercial banks have applied various solutions, including corporate governance because corporate governance plays an important role in the business activities of an enterprise in general as well as in that of a commercial bank in particular. The purpose of this paper is to investigate the impact of corporate governance on the stabilities of Vietnamese commercial banks in the period from 2009 to 2020. Using hand-collected data from 25 commercial banks in Vietnam, by system GMM estimation and the Bayesian Mixed-Effects approach, the paper identifies the characteristics of corporate governance affecting bank stability. Board size, women board members, and board members’ education have a positive impact, and dependent board and foreign board members have a negative impact on bank stability. Our findings show important evidence for an emerging country, such as Vietnam. From the empirical results, the authors suggest several recommendations to maintain and enhance bank stability in the future time.