Digital Transformation in Vietnam Commerical Banks: Moderating effect of COVID-19 Pandemic

Abstract

Digital Transformation has attracted the attention of researchers and managers for a long time. The study aims to investigate the impact of digital transformation on bank performance in emerging countries such as Vietnam. The Feasible Generalized Least Square (FGLS) regression method was employed to test the research hypotheses and determine variables relationships in the proposed model. A panel data collected from 17 joint-stock commercial banks in Vietnam in the period between 2013 and 2022. The empirical results show that Digital Transformation has a significant and positive impact on the profitability of commercial banks while having a significant but negative effect on operational costs. However, the moderating variable, COVID-19 pandemic, is not statistically significant, showing that COVID-19 pandemic does not stimulate the positive outcomes of Digital Transformation regarding profit-making capability and cost efficiency within commercial banks in the data sample. Control variables such as Credit Risk, Solvency, and GDP exert certain significant influences on bank performance. Therefore, these findings provide new insights that help financial institutions compete and adapt to continuously changing conditions resulting in competitive advantages and success of Vietnam commercial banks in modern days.