Impact of corporate governance factors on credit risk and cause financial depression at Vietnamese commercial banks

Abstract

Credit risk and financial distress have long been considered serious problems and pose many dangers to the entire financial and banking system in general and the banking industry in particular, which can cause bankruptcy and loss of reputation in the eyes of investors and managers of the financial and banking market. Therefore, understanding that danger, the study focuses on examining and discussing the relationship between corporate governance mechanisms for credit risk and financial distress occurring at 27 Vietnamese commercial banks listed on the HOSE, HNX and UPCOM in the period from 2013 to 2023 to help investors, managers or competent financial authorities to better understand the causes and consequences of this situation, as well as have more sources of information to make more effective decisions on bank management. The study uses data of banks listed on the Vietnamese stock exchanges and applies statistical analysis and panel data modeling. In the study, the author uses quantitative research methods such as panel data linear regression models using Pooled OLS, FEM, REM methods to examine the relationship between corporate governance mechanisms. The study consolidates the knowledge and significance of the theory used for corporate governance aspects. Provides investors with information on the effectiveness of corporate governance mechanisms related to control on the aspect of “Credit Risk”. This study also provides Vietnamese regulators with evidence of the negative impact of “Credit Risk” on “Financial Distress”, requiring the protection of investors from such situations by improving established credit rules and laws. Finally, this study contributes to the existing knowledge by investigating the antecedents and consequences of credit risk in the banking sector. This study also has a new point by examining the moderating role of ownership concentration between Credit Risk and Financial Distress