Testing the Relationship between Corporate Governance and Bank Performance – An Empirical Study on Vietnamese Banks

The paper examines the impact of corporate governance on performance of Vietnamese banks. The Corporate Governance Index has been used to evaluate corporate governance of Vietnamese banks in the period of 2010-2012. The return on equity and return on assets have been used to measure the bank performance. It is found that there is a significant gap between actual practices of corporate governance of Vietnamese banks and the international principles, a statistically significant difference in corporate governance of listed banks and non-listed banks in Vietnam. Better corporate governance is associated with better performance. The authors also have found the positive correlation of disclosure, the role of board of directors, shareholders and shareholder meetings with bank performance in Vietnamese banks. The relationship between supervisory board and bank performance has not been found. These findings lay a foundation for policy makers to make necessary changes to improve corporate governance (i.e role of Board of directors, disclosure and shareholder issues) of banks in Vietnam in the current restructure of the banking system.