Sustainable development: does information and communication technology have an impact on stability in the banking industry? empirical evidence from Vietnam

Abstract

Information and Communication Technology plays a pivotal role in enhancing the efficiency, effectiveness of customer services and improving overall business processes in the banking sector. The swift progression of digital and intelligent technologies is reshaping societies, production methods, and global economies. The banking industry in Vietnam has been at the forefront of embracing Information and Communication Technology in its operations, navigating both opportunities and challenges within the digital transformation landscape. However, the digital transformation of banks entails substantial upfront costs and generates relatively modest profits in the short term. This research investigates the impact of ICT on the performance and stability of financial institutions, particularly banks in Vietnam, spanning the years 2009 to 2020. The results suggest that preparedness for IT development and implementation significantly influences the stability of banks. The study underscores the necessity for additional research on leveraging ICT to foster the growth of the banking system and underscores the crucial role of these technologies in financial institutions, given their potential to drive long-term operational stability and efficiency. Our research takes a fresh approach to analyzing sustainable development in Vietnam's banking industry. Unlike previous studies, along with panel data collection, we employ a sophisticated regression method called GMM, offering new insights not previously gleaned from Vietnamese banking data. Furthermore, we move beyond individual banks' ICT capabilities by incorporating national ICT indicators as control variables. This unique approach ensures our assessments are objective and account for broader economic and technological contexts. We delving into the impact of banks' internal factors like governance and risk management practices, providing a more comprehensive examination of the bank's external and internal factors. The last research gap we want to fill is that previous studies on ICT in Vietnam only mentioned profitability but ignored the important factor of risk. Therefore, in this research article we will include not only the bank's performance but also the bank's risk expressed through the ZScore variable to get a comprehensive picture of sustainable development of banking industry