Foreign Ownership and Profitability in Vietnamese Banks: New Evidence on Intellectual Capital Mediation

ABSTRACT

This article analyses the relationship between foreign ownership structure and financial performance, measured by return on assets (ROA) and return on equity (ROE), in Vietnam's banking industry. The dataset consists of annual observations from 26 Vietnamese commercial banks over the period 2005–2023. The study employs random‐effects estimation, system GMM, Heckman selection model, quantile regression and mediation analysis to examine the relationship between foreign ownership and bank performance. The findings indicate that foreign ownership is positively and significantly associated with ROA. This positive association is observed across all profitability levels for ROA, whereas, for ROE, statistical significance appears only among mid‐ and high‐performing banks. The results are consistent with intellectual capital (IC) mediating the relationship between foreign ownership and bank profitability, with human capital efficiency (HCE) and capital employed efficiency (CEE) showing the strongest associations. These findings suggest that policymakers should consider gradually relaxing foreign ownership restrictions while promoting policies that enhance human capital development and efficient capital utilization in the banking sector. Such measures may help strengthen productivity, governance quality and long‐term competitiveness of Vietnamese banks.