Information technology investment and bank risk-taking: A case study of commercial banks in Vietnam

Abstract

The impact of Information Technology (IT) investment poses many challenges to financial stability in the banking system. Based on a dataset of  25 Vietnamese commercial banks for the period 2009 - 2019, we use the SGMM estimate, a method improved by Arellano and Bond (1991), to investigate the relationship between IT investment and bank risk-taking case of Vietnamese. The results suggest that IT investment tends to be positively correlated with Vietnamese banks’ bank risk-taking. Besides, we find that the bank risk-taking ability of banks is quite sensitive to a number of specific factors of the banking industry (financial structure, bank size, credit risk, diversification, etc.) and macro factors (growth rate and inflation). Thus, we propose some suggestions for governance and macro management policies to minimize Vietnamese commercial banks’ risks.