The relationship between income diversification, human capital, scale and financial performance of Vietnam’s joint stock commercial banks listed on HOSE

Abstract

The performance of businesses in general and specifically commercial banks in Vietnam is consistently a focal point for management. This is pivotal because the efficiency of operations determines the longevity and progress of these entities. For Vietnamese joint-stock commercial banks, their performance significantly impacts various aspects, making it a key concern for customers, shareholders, and investors alike. Presently, banks have expanded their scope beyond mere credit operations, delving into investment diversification and service expansion, thereby widening their profit avenues. Drawing from portfolio diversification theory, the resource-based view, and economies of scale theory, it’s suggested that organizations diversify their operations to minimize risks and maximize efficiency. However, not all ventures are profitable, and not all banks possess the capability to diversify effectively. Utilizing data from 15 joint-stock commercial banks listed on the HOSE between 2013 and 2022, this study aims to furnish empirical evidence to aid bank management in their decision-making regarding diversification or specialization strategies. The FGLS regression analysis reveals a positive correlation between income diversification, human capital, labor scale, and financial performance. Based on these findings, managerial strategies are recommended to help Vietnamese joint-stock commercial banks bolster their operational efficiency.