The trilogy between CEO overpower, green credit, and core competence: Evidence from commercial banks in Vietnam. Heliyon, 9(10), e20445. (SCIE/Scopus Q1)

Summary:

As an integral part of the green financial system, green credit is increasingly attracting the attention of many countries worldwide. The green credit model plays a crucial role in providing the necessary funding to achieve the sustainable development goals set by the United Nations, particularly in the areas of environment and climate change. In Vietnam, green credit initiatives have been implemented in recent years, yielding positive outcomes in various sectors, including energy conservation, the use of renewable energy, and the development of clean and high-tech agriculture.

This research focuses on exploring the relationship between the power of Chief Executive Officers (CEOs), green credit, and the core competence of commercial banks in Vietnam. We employ a Generalized Method of Moments (GMM) model to assess the detailed linear and non-linear effects of CEO power and the impact of implementing green credit on the core competence of commercial banks in Vietnam. Our data sample comprises 373 annual observations from 2010 to 2021, collected from financial reports of most commercial banks in Vietnam.

The research results reveal a non-linear relationship between the power of CEOs and the core competence of commercial banks, indicating that beyond a certain point, CEO power can negatively impact the core competence of banks. Furthermore, the implementation of green credit has been shown to decrease the core competence of banks, influenced by various objective factors such as asymmetrical information and legal frameworks related to green credit. For instance, challenges in the implementation of green credit in Vietnam include inconsistencies in regulations and definitions regarding green portfolios and sectors, as well as a lack of financial support for commercial banks participating in green credit. Additionally, the awareness and capabilities of credit institutions in developing green credit products are still limited.

A significant contribution of this research is addressing the moderation relationship between the factors in the model. Specifically, experienced and powerful CEOs can leverage the potential of green credit as a new trend in Vietnam, according to the first-mover advantages theory, enhancing competitiveness and reputation. This is especially relevant as the green lending market is developing, encouraging banks to attract new green customers and facilitating their entry and growth in this emerging market.

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