Foreign ownership and national governance quality affect liquidity risk – case in Vietnam

The paper aim to examine the impact of foreign ownership and national governance quality on liquidity risk in Vietnam's listed commercial banks from 2010 to 2021, covering the COVID-19 outbreak. Using the two-step generalized method of moments regression model (GMM), the findings indicate that foreign ownership deteriorates liquidity risk, while national governance quality has a positive effect on liquidity risk. In particular, the study highlights the positive impact of COVID-19 on liquidity risk because of the unpredicted demand for cash withdrawals by customers, which led to a shortage of cash holdings in commercial banks. Consistent with agency and neo-institutional theories, the findings are robust to a series of endogenous checks using an alternative regression method, such as pooled ordinary least squares, and the generalized method of the moments regression model.