Tam Thanh Nguyen DUONG, Hai Thanh PHAN, Tien Ngoc HOANG, Tien Thuy Thi VO / Journal of Asian Finance, Economics and Business Vol 7 No 9 (2020) 075–084 75 75 Print ISSN: 2288-4637 / Online ISSN 2288-4645 doi:10.13106/jafeb.2020.vol7.no9.075 The Effect of Financial Restructuring on the Overall Financial Performance of the Commercial Banks in Vietnam Tam Thanh Nguyen DUONG 1 , Hai Thanh PHAN 2 , Tien Ngoc HOANG 3 , Tien Thuy Thi VO 4 Received: July 03, 2020 Revised: July 25, 2020 Accepted: August 10, 2020 Abstract The study investigates and measures the impact of financial restructuring on overall financial performance of commercial banks in Vietnam. Survey data for this research were collected from audited financial reports of 28 commercial banks in Vietnam, for the period from 2008 to 2018. In the study, we have built a model of econometric regression with the dependent variable being financial results measured through ROA and ROE. The research methods used include Pooled Ordinary Least Square Model (POLS), Fixed Effects Model (FEM), Random Effects Model (REM), and different Generalized Method of Moments (GMM). The results showed that the account payables restructuring and owners’ equity restructuring are much needed. Increasing the owners’ equity, decreasing the account payables would improve the overall financial performance, bad debts restructuring to decrease bad debts would also improve the financial performance as well. However, the financial restructuring in the period 2012-2015 and 2016-2018, indeed worsen the financial performance during those times. The findings of this study suggest that the evaluation of the financial performance after restructuring of commercial banks in Vietnam must be based on longer data. At the same time, it is necessary to examine differences between various banking groups to draw accurate conclusions on financial performance. Keywords: Financial Restructuring, Financial Performance, Commercial Banks, Quantitative Research Method, Vietnam JEL Classification Code: L25, P47, G34, G32 more efficiently to decrease their costs. They have to grow and apply new technologies, provide new products and services to be able to compete in this environment. In fact, in this competitive market, the banking systems of many developing economies are still very weak and ineffective. To resolve this problem, the financial restructuring had been done to improve the financial performance of banks (Denizer et al., 2007; Isik & Hassan, 2002; Zhao et al., 2010). These restructuring activities will help banks to improve their financial performance, better allocate the resources, initiate innovations, increase profits, improve service quality for customers and maintain the stability in the financial system (Osoro, 2014). In many cases, financial restructuring is no longer an option, it is indeed one of the critical actions for the survival and growth of a bank (Rogovsky et al., 2005). Vietnam has been a fast-growing country in the South East Asia region in the past centuries. However, with the hit of the world crisis in 2007, the commercial accounting system in Vietnam faced many difficulties, especially shortcomings in finance, high rate of bad debts, risks in liquidity issues, and legal matters. New commercial banks were established, but many were under pressure to survive and grow. Therefore, 1. Introduction Globalization in the financial markets has created a very competitive environment for the international commercial banks. In such an environment, the overall financial performance of commercial banks has become very important (Harker & Zenios, 2000; Isik & Hassan, 2002). The commercial banks have to work more effectively and 1 First Author. PhD Student, Lecturer, Banking University of Ho Chi Minh City, Ho Chi Minh City, Vietnam. Email: tamdnt@buh.edu.vn 2 Corresponding Author. Associate Professor, Faculty of Accounting, Institute of Research and Development, Duy Tan University, Da Nang, Vietnam [Postal Address: 254 Nguyen Van Linh Street, Thanh Khe District, Da Nang City, 550000, Vietnam] Email: phanthanhhai@ duytan.edu.vn 3 Lecturer, Graduate School, Duy Tan University, Da Nang, Vietnam. Email: tienvjc@gmail.com 4 Lecturer, VNUK Institute for Research and Executive, The University of Da Nang, Da Nang, Vietnam. Email: tien.vo@vnuk.edu.vn © Copyright: The Author(s) This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.