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Can Foreigners Improve the Profitability of Emerging Market Banks? Evidence from the Vietnamese Strategic Partner Program

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  • Giang Phung
  • Michael Tröge

Abstract

Foreign ownership and foreign management are often assumed to improve the efficiency of emerging market banks. Our article examines this relationship for the Vietnamese strategic partner program, where foreign banks have been allowed to take minority stakes in local banks. We add to the existing literature by distinguishing between ownership by foreign strategic and non-strategic investors, and between foreign management sent by the strategic partner and independent foreign executives. We show that only the presence of independent foreign executives has a positive impact on banks. We interpret these results as the consequence of conflicts of interest and power struggles between local shareholders and the strategic partner, which prevent efficiency in enhancing technology transfer.

Suggested Citation

  • Giang Phung & Michael Tröge, 2018. "Can Foreigners Improve the Profitability of Emerging Market Banks? Evidence from the Vietnamese Strategic Partner Program," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(7), pages 1672-1685, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:7:p:1672-1685
    DOI: 10.1080/1540496X.2017.1318055
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