Impact of Technological Investment and Ownership Structure on the Profitability of Commercial Banks: Evidence from Vietnam

Abstract

Background: COVID-19 has influenced various aspects of people's lives and many industries and sectors of the economy, including banking. Commercial banks must improve operational efficiency as economies integrate, and catalyst improves banks' operational performance to increase competitiveness, market share, and sustainable growth.

Objective: The study was conducted to evaluate the benefits of technology investment in improving the profitability of commercial banks in the Vietnamese market. In addition, the study also analysed technology investment based on capital structure, classified into state-owned commercial banks and non-state-owned commercial banks, to evaluate the impact of each type of bank on improving profitability.

Methodology: The study assessed 26 Vietnamese commercial banks from 2012 to 2023 employing panel data, Ordinary Least Squares, Fixed Effects Model, Random Effects Model, and Generalised Method of Moments to ensure the accuracy and reliability of the regression results.

Result: The results show that technology investment can significantly improve banks' profitability. However, the study only found that technology investment is effective in non-state-owned banks.

Conclusion: The study confirms that technological investments significantly enhance the profitability of Vietnamese non-state-owned commercial banks, highlighting the strategic importance in the context of digital transformation.

Unique Contribution: The study's innovative approach examines the effects of technology investment and ownership structure on Vietnamese commercial banks' profitability. These contributions demonstrate the study's importance in guiding Vietnamese banks and policymakers through digital banking transformation possibilities.

Key Recommendation: The author proposed legislative proposals to improve the use of digital technology trends, which provide joint stock commercial banks in Vietnam with competitive advantages and mitigate risks in banking operations. Banks must develop suitable strategies to effectively implement technological developments in their operations and management practices.