Technological Investment and its Effect on Stock Return and Profitability: A Study of Vietnamese Commercial Banks Amid Fintech Growth

Abstract

Background: The Fourth Industrial Revolution has significantly influenced nearly every facet of economic and social existence. Digital banking transactions have proven useful during the COVID-19 pandemic. However, they also cause many concerns, especially for banks. To survive in the rapidly changing environment of digital technology, banks have few options to respond except to increase spending on technology investments regardless of the effectiveness of those investments.

Objective: The study was conducted to find the relationship between technology investment factors on stock returns and bank profits in the context of Fintech growth.

Methodology: The study was conducted based on data from 26 joint stock commercial banks in Vietnam from 2010 to 2023; after influencing technical investment on stock returns and profitability can be analysed using several statistical models, such as Ordinary Least Squares (OLS), Fixed Effects Model (FEM), Random Effects Model (REM), Feasible Generalized Least Squares (FGLS), and Generalized Method of Moments (GMM).

Result: The author's research revealed that technological elements substantially influenced stock returns and contributed to increasing profits for banks during the Covid period. However, while technology investment led to higher profits, it also resulted in decreased stock returns for commercial banks.

Conclusion: the author also found a negative correlation between bank size, profit factors, and the stock market.

Unique Contribution: This study examines the impact of technology investment on stock return and profitability of Vietnamese commercial banks in the context of fintech expansion. It explores the benefits of this research in both theoretical and practical aspects.

Key Recommendation: Based on the research findings, the author suggested legislation and policies to enhance technology investment and its impact on stock return and profitability of Vietnamese commercial banks in light of fintech expansion. Furthermore, commercial banks must enhance their investment in technology, seeing it as a pivotal approach in the foreseeable future. Simultaneously, it is crucial to establish a rational benchmark for technology investment. However, this task is complex due to the varying essential attributes of each bank and the diverse economic and technical conditions prevailing in different banks.