What does this research mean for the field?

Foreign bank presence has nonlinear effects on financial stability in Vietnam, where increasing foreign bank numbers enhances stability only beyond a critical threshold, while excessive foreign asset shares generate destabilizing outcomes that are moderated by institutional quality. Novelty: ClaimNovelty.NOVEL_FINDING. Consensus alignment: ConsensusAlignment.SUPPORTS_CONSENSUS.

What question did this study set out to answer?

To investigate the nonlinear impacts of foreign bank presence on financial stability and determine how traditional and digital institutional quality moderate these effects.

August 29, 2026Asian Journal of Economics and BankingOpen Access

Foreign bank presence, threshold effects, and institutional moderation: a causal machine learning approach to financial stability in Vietnamese banks

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To investigate the nonlinear impacts of foreign bank presence on financial stability and determine how traditional and digital institutional quality moderate these effects.
Analyzed a balanced bank-year panel of 28 Vietnamese commercial banks from 2010 to 2024.
Applied Hansen's threshold regression and Causal Forests with Double Machine Learning to capture nonlinearities and heterogeneity.
Quantified institutional quality using the Enhanced Worldwide Governance Index, integrating standard and digital governance indicators.
Foreign bank numbers enhance financial stability only above a specific threshold, while excessive foreign asset shares trigger destabilizing effects.
Small and privately owned banks experience stronger stabilizing benefits from foreign bank entry, though positive effects diminished following the COVID-19 shock.
Under weak institutional quality, foreign banks improve stability by filling institutional voids, whereas their marginal contribution declines in strong institutional environments.

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Implication

Panel data analysis reveals threshold-dependent impacts of foreign bank presence on financial stability in commercial banks, highlighting the moderating influence of institutional quality.

Cite This Study

Thuy Tu Pham (2026) studied this question.

synapsesocial.com/papers/6a9299c88e5d7d1fc0c11f00 https://doi.org/10.1108/ajeb-01-2026-0009

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Implication

Panel data analysis reveals threshold-dependent impacts of foreign bank presence on financial stability in commercial banks, highlighting the moderating influence of institutional quality.

Foreign bank presence, threshold effects, and institutional moderation: a causal machine learning approach to financial stability in Vietnamese banks

Key Points

Discussion

Implication

Cite This Study

Foreign bank presence, threshold effects, and institutional moderation: a causal machine learning approach to financial stability in Vietnamese banks

Key Points

Discussion

Implication

Cite This Study

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