Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

Technological Factors Affecting the Profitability of Commercial Banks in Vietnam

Author(s): Nga Phan Thi Hang, My-Linh Thi Nguyen

The objective of the paper is to analyze how technological factors affect the profitability of commercial banks in Vietnam, and estimate the Pooled Regression Model (Pooled OLS), the Fixed Effects Model (FEM), the Random Effects Model (REM) and the Generalized Method of Moments (GMM). Although technology has been playing a key role in Vietnamese banking operations in recent years, there is no study investigating the impact of technology on efficiency of banks in Vietnam. The results of this study might help banks’ managers using technology effectively. The dependent variable is the return of equity ratio (ROE) and the independent variables are technological factors affecting the profitability of commercial banks in Vietnam. Based on the secondary and primary data collected from 21 banks in the period 2008–2017, the estimation results show that the profitability of commercial banks is influenced by the following factors: using technology in business operations; using technology for automated payment via telephone and computer; technological innovation and the research results also indicate that the profitability of banks is affected by the ratio of equity on total assets; cost management capacity; credit risk; bank size; and inflation. From the research results, the authors propose some policy implications for commercial banks to improve the efficiency of technology use and exploitation during the period of the industrial revolution 4.0.