Impact of foreign ownership and foreign bank presence on liquidity risk: Evidence from Viet Nam


  • Nguyen Duy Suu Faculty of Finance and Banking, Ton Duc Thang University (TDTU)
  • Ho Thuy Tien Faculty of Finance and Banking, University of Finance - Marketing (UFM)
  • Do Thi Thanh Nhan Faculty of Finance and Banking, Ton Duc Thang University (TDTU)
  • Shin-Hung Pan Department of M-Commerce and Multimedia Applications Asia University
  • Wing-Keung Wong Department of Finance, Fintech Center, and Big Data Research Center, Asia University



Foreign Ownership, Foreign Bank, Liquidity Risk, Commercial Bank, Credit Risk


Purpose: This study examines the impact of foreign ownership and foreign bank presence on the liquidity risk of Vietnam commercial banks.

Design/Methodology/Approach: We use Pooled Ordinary Least Square Model, Fixed Effects Model, and Random Effects Model to analyze the panel data. Additionally, to overcome the limitations of the model, the Generalized Least Squares method is applied.

Findings: The study found that an increase in the foreign ownership ratio reduces the liquidity risk of Vietnam commercial banks, which means that it can help reduce the liquidity risk. Conversely, an increase in foreign bank presence has a positive effect on the liquidity risk of Vietnam commercial banks, leading to higher liquidity risk. The study also highlights the positive impact of credit risk on the liquidity risk of commercial banks.

Research limitations/implications: Research data is limited because some Vietnam commercial banks did not fully disclose information over the period that we do not study in our paper. Therefore, a few factors have not yet been considered in the research model, so future research could expand the scope of the study by increasing the sample size to get better reliability of the research results. Furthermore, future research should include other commercial banks in other countries for comparison.

Practical implications: This study has several significant practical implications for commercial banks regarding the impact of foreign ownership and foreign bank presence liquidity risk to maintain stability in the bank’s operations. The inference from our findings to investors is that they should consider the risk management activities of commercial banks to make reasonable decisions. Finally, the State bank of Vietnam should monitor the activities of commercial banks in order to have support policies that can prevent major risks to the banking system.

Originality/value: The findings in our paper provide empirical evidence of the role of foreign shareholders in the liquidity risk management in commercial banks and the presence of foreign banks has an impact on the liquidity management of commercial banks in Vietnam. Our findings are news in the literature.


Abbas, F., Ali, S., & Wong, W. K. (2022). IMPACT OF ECONOMIC FREEDOM AND ITS SUBCOMPONENTS ON COMMERCIAL BANKS’RISK-TAKING. Annals of Financial Economics, 17(03), 2250022.

Acharya, V. V., & Viswanathan, S. X. X. X. X. (2011). Leverage, moral hazard, and liquidity. The Journal of Finance, 66(1), 99-138.

Adebayo, T. S., Kirikkaleli, D., & Rjoub, H. (2022). Time–frequency analysis between economic risk and financial risk in the mint nations: what causes what?. Annals of Financial Economics, 17(02), 2250013.

Alghalith, M., Guo, X., Wong, W. K., & Zhu, L. (2016). A general optimal investment model in the presence of background risk. Annals of Financial Economics, 11(01), 1650001.

Berger, A. N., & Sedunov, J. (2017). Bank liquidity creation and real economic output. Journal of Banking & Finance, 81, 1-19.

BIS (2010), Basel III: International framework for liquidity risk measurements, standards and monitoring, Basel Committee on banking Supervision, 1-48.

Bonfim, D., & Kim, M. (2012). Liquidity risk in banking: is there herding. European Banking Center Discussion Paper, 24, 1-31.

Bonner, C., Van Lelyveld, I., & Zymek, R. (2015). Banks’ liquidity buffers and the role of liquidity regulation. Journal of Financial Services Research, 48(3), 215-234.

Bryant, J. (1980). A model of reserves, bank runs, and deposit insurance. Journal of banking & finance, 4(4), 335-344.

Buch, C. M., & Goldberg, L. S. (2015). International banking and liquidity risk transmission: Lessons from across countries. IMF Economic Review, 63(3), 377-410.

Bunda, I., & Desquilbet, J. B. (2008). The bank liquidity smile across exchange rate regimes. International Economic Journal, 22(3), 361-386.

Cetorelli, N., & Goldberg, L. S. (2012). Follow the money: Quantifying domestic effects of foreign bank shocks in the great recession. American Economic Review, 102(3), 213-18.

Chagwiza, W. (2014). Zimbabwean commercial banks liquidity and its determinants. International Journal of Empirical Finance, 2(2), 52-64.

Claeys, S., & Vander Vennet, R. (2008). Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West. Economic Systems, 32(2), 197-216. doi: 10.1016/j.ecosys.2007.04.001.

Chang, C. L., McAleer, M., & Wong, W. K. (2020). Risk and financial management of COVID-19 in business, economics and finance. Journal of Risk and Financial Management, 13(5), 102.

Chen, J. K., & Sriphon, T. (2022). The relationships among authentic leadership, social exchange relationships, and trust in organizations during COVID-19 pandemic. Advances in Decision Sciences, 26(1), 31-68.

Chen, M., Wu, J., Jeon, B. N., & Wang, R. (2017). Do foreign banks take more risk? Evidence from emerging economies. Journal of Banking & Finance, 82, 20-39

Cifuentes, R., Ferrucci, G., & Shin, H. S. (2005). Liquidity risk and contagion. Journal of the European Economic association, 3(2-3), 556-566.

Cornett, M. M., McNutt, J. J., Strahan, P. E., & Tehranian, H. (2011). Liquidity risk management and credit supply in the financial crisis. Journal of financial economics, 101(2), 297-312.

Cucinelli, D. (2013). The determinants of bank liquidity risk within the context of euro area. Interdisciplinary Journal of Research in Business ISSN, 2046, 7141.

Darsono, S. N. A. C., Wong, W. K., Nguyen, T. T. H., Jati, H. F., & Dewanti, D. S. (2022). Good governance and sustainable investment: The effects of governance indicators on stock market returns. Advances in Decision Sciences, 26(1), 69-101.

Deep, A., & Schaefer, G. (2004). Are banks liquidity transformers? Harvard University Faculty Research. Working Paper.

Delechat, M. C., Arbelaez, M. H., Muthoora, M. P. S., & Vtyurina, S. (2012). The determinants of banks' liquidity buffers in Central America. International Monetary Fund. , 12(301), 1-42.

Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: some international evidence. The World Bank Economic Review, 13(2), 379-408.

Diamond, D. & Rajan, R.G. (2001). Liquidity risk, liquidity creation and financial fragility: A theory of banking. Journal of Political Economy, 109(2), 287-327.

Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of political economy, 91(3), 401-419.

Diamond, D. W., & Rajan, R. G. (2005). Liquidity shortages and banking crises. The Journal of finance, 60(2), 615-647.

Diamond, D. W., & Rajan, R. G. (2011). Fear of fire sales, illiquidity seeking, and credit freezes. The Quarterly Journal of Economics, 126(2), 557-591.

Dietrich, D., & Vollmer, U. (2010). International banking and liquidity allocation. Journal of financial services research, 37(1), 45-69.

Dinger, V. (2009). Do foreign-owned banks affect banking system liquidity risk?. Journal of Comparative Economics, 37(4), 647-657.

Drehmann, M., & Nikolaou, K. (2013). Funding liquidity risk: definition and measurement. Journal of Banking & Finance, 37(7), 2173-2182.

Duong, D. K., Phan, T. T. P., Pho, K. H., & McAleer, M. (2020). Impact of board characteristics and state ownership on dividend policy in Vietnam. Advances in Decision Sciences, (4), 1-34.

Duqi, A., & Al-Tamimi, H. A. H. (2018). The impact of owner’s identity on banks’ capital adequacy and liquidity risk. Emerging Markets Finance and Trade, 54(2), 468-488.

Duong, K. D., Nguyen, Q. N., Le, T. V., & NGUYEN, D. V. (2021). Limit-to-arbitrage factors and ivol returns puzzle: Empirical evidence from Taiwan before and during COVID-19. Annals of Financial Economics, 16(01), 2150004.

Duttweiler, R. (2009). The meaning of liquidity risk. Chapter, 1, 10-11.

Fadare, S. O. (2011). Banking sector liquidity and financial crisis in Nigeria. International Journal of Economics and Finance, 3(5), 3-11. doi:10.5539/ijef.v3n5p3

Freixas, X., & Holthausen, C. (2005). Interbank market integration under asymmetric information. The Review of Financial Studies, 18(2), 459-490.

Gasbarro, D., Wong, W. K., & Zumwalt, J. K. (2012). Stochastic dominance and behavior towards risk: The market for iShares. Annals of Financial Economics, 7(01), 1250005.

Gorton, G., & Huang, L. (2004). Liquidity, efficiency, and bank bailouts. American Economic Review, 94(3), 455-483.

Gorton, G., & Metrick, A. (2012). Securitized banking and the run on repo. Journal of Financial economics, 104(3), 425-451.

Gorton, G., & Winton, A. (2017). Liquidity provision, bank capital, and the macroeconomy. Journal of Money, Credit and Banking, 49(1), 5-37.

Gajewski, K. (2021). Agency problems in multinational banks: does parent complexity affect the risk-taking of subsidiaries?. Journal of Credit Risk, 17(4).

He, Z., & Xiong, W. (2012). Rollover risk and credit risk. The Journal of Finance, 67(2), 391-430.

Hills, R., Hooley, J., Korniyenko, Y., & Wieladek, T. (2015). International Banking and Liquidity Risk Transmission: Evidence from the United Kingdom. IMF Economic Review, 63(3), 606-625.

Imbierowicz, B., & Rauch, C. (2014). The relationship between liquidity risk and credit risk in banks. Journal of Banking & Finance, 40, 242-256.

İncekara, A., & Çetinkaya, H. (2019). Liquidity risk management: A comparative analysis of panel data between Islamic and conventional banking in Turkey. Procedia Computer Science, 158, 955-963.

Ivanov, M. (2010). The management of liquidity in banking industry. An Enterprise Odyssey, 635-648.

Jensen, M.C & Meckling, W.H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3 (4), 305–360.

Jensen, MC (1986). Agency costs of free cash flow, corporate finance and takeovers. American Economic Review, 76 (2), 323–330.

Kaur, U., & Sharma, R. (2019). Liquidity risk and credit risk: Impact on Banks. SCMS Journal of Indian Management, 16(2), 30-42.

Kasman, A., Tunc, G., Vardar, G., & Okan, B. (2010). Consolidation and commercial bank net interest margins: Evidence from the old and new European Union members and candidate countries. Economic Modelling, 27(3), 648-655.

Kerl, C., & Koch, C. (2015). International Banking and liquidity risk transmission: Evidence from Germany. IMF Economic Review, 63(3), 496-514.

Laurine, C. (2013). Zimbabwean commercial banks liquidity risk determinants after dollarisation. Journal of Applied Finance and Banking, 3(6), 97.

Lee, S. W. (2008). Ownership structure, regulation, and bank risk-taking: evidence from Korean banking industry. Investment management and financial innovations, (5, Iss. 4), 70-74.

Liu, S., & Sickles, R. (2021). The agency problem revisited: a structural analysis of managerial productivity and CEO compensation in large US commercial banks. Empirical Economics, 60(1), 391-418.

Nhan, D. T. T., Pho, K. H., ANH, D. T. V., & McAleer, M. (2021). Evaluating the efficiency of Vietnam banks using data envelopment analysis. Annals of Financial Economics, 16(02), 2150010.

Nguyen, D. S., Nguyen, V. D., Tran, D. T., & Dempsey, M. J. (2021). The Firm’s Performance in Relation to Capital Structure and Foreign Ownership: Evidence from Vietnam. Journal of Advanced Engineering and Computation, 5(1), 35-49.

Nguyen, T. T. H., Wong, W. K., Phan, G. Q., Tran, D. T. M., & Moslehpour, M. (2021). Corporate valuation spurred by information transparency in an emerging economy. Annals of Financial Economics, 16(03), 2150011.

Micco, A., Panizza, U., & Yanez, M. (2007). Bank ownership and performance. Does politics matter?. Journal of Banking & Finance, 31(1), 219-241.

Munteanu, I. (2012). Bank liquidity and its determinants in Romania. Procedia Economics and Finance, 3, 993-998.

Pawłowska, M., Serwa, D., & Zajączkowski, S. (2015). International banking and liquidity risk transmission: evidence from Poland. IMF Economic Review, 63(3), 585-605.

Phuong, D. N. T., & Wong, W. K. (2022). The Effects of Selected Financial Ratios on Profitability: An Empirical Analysis of Real Estate Firms in Vietnam. Annals of Financial Economics, 17(01), 1-29.

Saunders, A., & Cornett, M. M. (2008). Financial institutions management: A risk management approach. McGraw-Hill Irwin.

Saunders, A., Strock, E., & Travlos, N. G. (1990). Ownership structure, deregulation, and bank risk taking. the Journal of Finance, 45(2), 643-654.

Schinasi, G. J., & Teixeira, P. G. (2006). The lender of last resort in the European single financial market. In Cross-Border Banking: Regulatory Challenges (pp. 349-372).

Schoenmaker, D., & Oosterloo, S. (2007). Crossborder Issues in European Financial Supervision. The Structure of Financial Regulation, Routledge, London, 264-291.

Sensoy, A. (2017). Firm size, ownership structure, and systematic liquidity risk: The case of an emerging market. Journal of Financial Stability, 31, 62-80.

Singh, A., & Sharma, A. K. (2016). An empirical analysis of macroeconomic and bank-specific factors affecting liquidity of Indian banks. Future Business Journal, 2(1), 40-53.

Suu, N. D., Luu, T. Q., Pho, K. H., & McAleer, M. (2020). Net interest margin of commercial banks in Vietnam. Advances in Decision Sciences, 24(1), 1-27.

Suu, N. D., Tien, H. T., & Wong, W. K. (2021). The impact of capital structure and ownership on the performance of state enterprises after equitization: Evidence from Vietnam. Annals of Financial Economics, 16(02), 2150007.

Thakor, A. V. (1996). Capital requirements, monetary policy, and aggregate bank lending: theory and empirical evidence. The Journal of Finance, 51(1), 279-324.

Tarus, D. K., Chekol, Y. B., & Mutwol, M. (2012). Determinants of net interest margins of commercial banks in Kenya: A panel study. Procedia economics and finance, 2, 199-208.

Trang, L. N. T., Nhan, D. T. T., Hao, N. T. N., & Wong, W. K. (2021). Does Bank Liquidity Risk Lead To Bank’s Operational Efficiency? A Study In Vietnam. Advances in Decision Sciences, 25(4), 46-88.

Vinh, V. X., & Duc, M. X. (2017). Foreign Ownership and Liquidity Risk of Commercial Banks in Vietnam. VNU Journal of Science: Economics and Business, 33(3), 1-11

Vodová, P. (2013). Determinants of commercial bank liquidity in Hungary. Finansowy Kwartalnik Internetowy e-Finanse, 9(4), 64-71.

Valverde, S. C., & Fernández, F. R. (2007). The determinants of bank margins in European banking. Journal of Banking & Finance, 31(7), 2043-2063.

Wójcik-Mazur, A., & Szajt, M. (2015). Determinants of liquidity risk in commercial banks in the European Union. Argumenta Oeconomica, 2 (35).

Wong, E., Tsang, A., & Kong, S. (2015). International Banking and Liquidity Risk Transmission: Evidence from Hong Kong SAR. IMF Economic Review, 63(3), 515-541.

Wong, W. K. (2021). Editorial statement and research ideas for behavioral financial economics in the emerging market. International Journal of Emerging Markets, 16(5), 946-951.

Wong, W. K., Yeung, D., & Lu, R. (2022). The mean-variance rule for investors with reverse S-shaped utility. Annals of Financial Economics, 2250030.



How to Cite

Nguyen Duy Suu, Ho Thuy Tien, Do Thi Thanh Nhan, Shin-Hung Pan, & Wong, W.-K. (2023). Impact of foreign ownership and foreign bank presence on liquidity risk: Evidence from Viet Nam. Advances in Decision Sciences, 27(1), 23–44.