Impact of investment activities on the financial performance of Vietnamese commercial banks


Authors

  • Nguyen Thuc Huong Giang School of Economics and Management - Hanoi University of Science and Technology
  • Trinh Thi Hue School of Economics and Management - Hanoi University of Science and Technology
  • Pham Thi Quynh Trang School of Economics and Management - Hanoi University of Science and Technology
  • Nguyen Thi Phuong Dung School of Economics and Management - Hanoi University of Science and Technology
  • Le Thao Linh School of Economics and Management - Hanoi University of Science and Technology
DOI: https://doi.org/10.57110/vnu-jeb.v4i3.343

Keywords:

Investment activities, financial performance, commercial banks, Vietnam

Abstract

This study examines the influence of investment activities on the financial performance of Vietnamese joint-stock commercial banks. Utilizing the Ordinary Least Squares (OLS) regression model for quantitative analysis and STATA17 statistical software, financial data from 24 joint-stock commercial banks spanning 2018 to 2022 are analyzed. The research examines the impact of investments in stocks, bonds, businesses, and real estate on key financial performance metrics such as Return on Assets (ROA) and Net Interest Margin (NIM). The findings indicate that the investment rate in bonds positively affects their financial performance whereas investments in real-estate have a negative influence. Investment in stocks show no significant influence on bank performance during the period due to erratic market fluctuations. However, investments in subsidiaries and other businesses only affects ROA. Beyond contributing to the theoretical framework of financial management in Vietnam’s banking sector, these results offer insights for policymakers and bank managers to refine investment strategies and optimize financial performance, thereby enhancing industry competitiveness.

References

Bhebhe, S. & Ndlovu, G. (2023). Natural disasters, climate change risk and the performance of financial stocks: Evidence from the Johannesburg stock exchange. Reference Module in Social Sciences. http://doi.org/10.1016/B978-0-44-313776-1.00157-4

Trinh, B. V., Thuy, L. P., & Hau, V. T. (2023). Factors affecting Vietnamese commercial banks’ performance. Banking Review, 10/2023.

Chen, S., Sun, Z., Tang, S. & Wu, D. (2011). Government intervention and investment efficiency: Evidence from China. Journal of Corporate Finance, 17(2), 259-271. https://doi.org/10.1016/j.jcorpfin.2010.08.004

Davis, E. P., & Zhu, H. (2009). Commercial property prices and bank performance. The Quarterly Review of Economics and Finance, 49(4), 1341-1359. https://doi.org/10.1016/j.qref.2009.06.001

Zhang, D., Cai, J., Liu, J. & Kutan, A. M. (2018). Real estate investments and financial stability: Evidence from regional commercial banks in China. The European Journal of Finance, 24(16), 1388-1408. http://doi.org/10.1080/1351847X.2016.1154083

Dwilaksono, H. (2016). Effect of short and long tearm debt to profitability in the mining industry listed in JSX. Business and Entrepreneurial Review, 10(1). https://doi.org/10.25105/ber.v10i1.18

Eken, M. H., Selimler, H., Kale, S., & Ulusoy, V. (2012). The effects of global financial crisis on the behaviour of European banks: A risk and profitability analysis approach. ACRN Journal of Finance and Risk Perspectives, 1(2), 17–42.

Fachrudin, K. A. & Fachrudin, H. T. (2015). The Study of Investment Portfolio Management and Sustainability of Property and Real Estate Companies in Indonesia Stock Exchange. Procedia - Social and Behavioral Sciences, 211, 177-183. https://doi.org/10.1016/j.sbspro.2015.11.026

Fajinmi, C., Onuka, O. L. & Ayeni, E. (2023). Portfolio management and performance of deposit money banks (Dmbs) in Nigeria (1990-2020). Research in Globalization, 7, 100139. https://doi.org/10.1016/j.resglo.2023.100139

Fama, E. F. & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56. https://doi.org/10.1016/0304-405X(93)90023-5

Gao, H., Ouyang, Y. & Wang, Y. (2024). Corporate bond defaults and spillover effects on bank risk: Evidence from city commercial banks in China. Research in International Business and Finance, 69, 102252. https://doi.org/10.1016/j.ribaf.2024.102252

Habib, H., Khan, F., & Wazir, M. (2016). Impact of debt on profitability of firms: Evidence from non-financial sector of Pakistan. City University Research Journal, 6(01).

Hailu, A., Tassew, A. & Worku, A. (2018). The impact of investment diversification on financial performance of commercial banks in Ethiopia. Financial Studies, ISSN 2066-6071, Romanian Academy, National Institute of Economic Research (INCE), “Victor Slăvescu” Centre for Financial and Monetary Research, Bucharest, Vol. 22, Iss. 3 (81), pp. 41-55.

Harelimana, J. B. & Nizeyumukiza, E. (2020). Strategic Portfolio Investments and Financial Performance of Ecobank Rwanda Ltd. Journal of Biogeneric Science and Research. https://doi.org/10.46718/jbgsr.2020.01.000009

Hazzi, O. A. & Kilani, M. A. (2013). The financial performance analysis of Islamic and traditional Banks: Evidence from Malaysia. European Journal of Economics, Finance and Administrative Sciences, 57,133-144.

Thao, H. T. H., Dung, H. D. (2021). Investment operations, securities trading and securities classification in the accounting process at Vietnamese commercial banks. Banking Review, 12/2021.

Kamwaro, E. K. (2013). The impact of investment portfolio choice on financial performance of investment companies in Kenya. Doctoral dissertation, University of Nairobi.

Kara, K., Yalcin, G. C., Cetinkaya, A., Simic, V. & Pamucar, D. (2024). A single-valued neutrosophic CIMAS-CRITIC-RBNAR decision support model for the financial performance analysis: A study of technology companies. Socio-Economic Planning Sciences, 92, 101851. https://doi.org/10.1016/j.seps.2024.101851

Kowalewski, O. (2023). Effect of operating multiple affiliates on the performance of subsidiaries in the same host country. Research in International Business and Finance, 65, 101926. https://doi.org/10.1016/j.ribaf.2023.101926

Liu, L., Feng, A. & Liu, M. (2024). The effect of green innovation on corporate financial performance: Does quality matter? Finance Research Letters, 60(B), 105255. https://doi.org/10.1016/j.frl.2024.105255

Maghyereh. A. (2024). How real estate bubbles affect the systemic risk of financial institutions in the United Arab Emirates. Heliyon, 10(1), e23153. https://doi.org/10.1016/j.heliyon.2023.e23153

Martins, A. M., Correia, P. & Gouveia, R. (2023). Russia-Ukraine conflict: The effect on European banks’ stock market returns. Journal of Multinational Financial Management, 67, 100786. https://doi.org/10.1016/j.mulfin.2023.100786

Mondal, M. S. A., Akter, N. & Lbrahim, A. M. (2024). Nexus of environmental accounting, sustainable production and financial performance: An integrated analysis using PLS-SEM, fsQCA, and NCA. Environmental Challenges, 15, 100878. https://doi.org/10.1016/j.envc.2024.100878

Nyachwaya, Z. O., & Nyanga’u, A. S. (2020). The Relationship between Property Investment and Financial Performance of Commercial Banks Listed on the Nairobi Securities Exchange in Kenya. IJARKE Business & Management Journal (International Journals of Academics and Research)

Ren, M., Zhao, J. & Zhao, J. (2023). The crowding-out effect of zombie companies on fixed asset investment: Evidence from China. Research in International Business and Finance, 65, 101979. https://doi.org/10.1016/j.ribaf.2023.101979

Ross, S. A., Westerfield, R., & Jordan, B. D. (2008). Fundamentals of Corporate Finance. New York, NY: Tata McGraw-Hill Education.

Salman, A. D., Mata, B. A. K., Kurfi, A. K., & Ado, A. B. (2020). The relationship between the investment portfolio and banking financial performance in Nigeria. Asian People Journal (APJ), 3(1), 141-151. https://doi.org/10.37231/apj.2020.3.1.171

Thai, H. M., Nguyen Thuc Huong, G., Nguyen, T.T., Pham, H. T., Nguyen, H. T. K. & Vu, T.H. (2023). Impacts of climate change risks on financial performance of listed firms in agriculture industries in Vietnam. Journal of Agribusiness in Developing and Emerging Economies. https://doi.org/10.1108/JADEE-07-2022-0137

Verma, S. K. & Kumar, S. (2024). Fractal dimension analysis of financial performance of resulting companies after mergers and acquisitions. Chaos, Solitons & Fractals, 181, 114683. https://doi.org/10.1016/j.chaos.2024.114683

Downloads

Download data is not yet available.

Additional Files

Published

25-06-2024

Abstract View

569

PDF Downloaded

0

How to Cite

Nguyen Thuc Huong Giang, Trinh Thi Hue, Pham Thi Quynh Trang, Nguyen Thi Phuong Dung, & Le Thao Linh. (2024). Impact of investment activities on the financial performance of Vietnamese commercial banks. VNU JOURNAL OF ECONOMICS AND BUSINESS, 4(3), 21. https://doi.org/10.57110/vnu-jeb.v4i3.343

Issue

Section

Original Article

Most read articles by the same author(s)