Political Connection in Corporate Governance and Bank Performance in Vietnam

Abstract

The presence of political connection among firms has been popular in the world because of its potential benefits to performance of these firms. Noticeably, in the backward financial system and highly corrupted countries, the relationship-based firms become more common and better recognized phenomenon since political linkage may help firms reduce significantly external uncertainty as well as increase their competitive advantages in an intensively integrated environment like these days. This paper aimed at finding the relationship between political connection in corporate governance and performance of commercial banks in Vietnam with a view to filling literature gap and supporting policy makers as well as managers of banks. The paper shows that hard political connection has significantly positive relationship with bank performance. In addition, when political-connected and unconnected banks are compared, connected banks outperformed unconnected banks which were found to be less risky as a consequence.