The role of control and power in the relationship between ownership structure and credit risk: a study from Vietnamese banks

Abstract:
Purpose
The paper aims to examine the moderating role of factors such as foreign leadership and listing on the relationship between ownership structure and credit risk (CR) in Vietnamese commercial banks.

Design/methodology/approach
Research data were collected from 28 commercial banks in Vietnam over the period 2009–2023. The system-generalized method of moments was employed to generate the estimated results.

Findings
The research results revealed that (1) the negative impact of foreign ownership (FO) on CR was stronger for banks with foreign board members and (2) the positive impact of ownership concentration on CR was weaker for listed banks.

Research limitations/implications
Recommendations are proposed to regulatory agencies and commercial banks to mitigate credit risks.

Originality/value
This research develops theories related to the role of control and empowerment of foreign shareholders in mitigating CR in banks. Specifically, the developed theories emphasize that (1) the governance mechanism towards empowering and responsibilities of foreign shareholders would help utilize FO to mitigate CR and (2) the control and monitoring mechanism would mitigate the impact of concentrated ownership in increasing CR.