Board Characteristics and Digital Transformation: Evidence from Vietnamese Commercial Banks
Abstract
Drawing on agency theory, resource dependence theory, and upper echelons theory, this study examines how board characteristics and ownership structure relate to digital transformation in 29 Vietnamese commercial banks from 2012–2024. Using 377 bank-year observations, the study develops a multidimensional Digital Transformation Index (DTI) comprising four dimensions. The baseline models use Prais–Winsten panel-corrected standard errors (PCSEs) and are complemented by nonlinear, post-2020, ownership-moderation, robustness, endogeneity, and alternative-measurement analyses. The results indicate that board size is negatively associated with digital transformation. In contrast, board independence is consistently and positively associated with it, and directors’ educational attainment is positively associated with selected dimensions. The nonlinear analysis further suggests that the negative association of board size becomes more pronounced beyond a moderate board size, without implying a universally optimal threshold. State ownership is negatively associated with the aggregate DTI and several of its dimensions, whereas foreign ownership shows no consistently positive association. We find no statistically significant evidence that state ownership systematically strengthens or weakens the relationships between board gender diversity or board independence and digital transformation. The post-2020 analysis further reveals temporal heterogeneity, particularly in the relationships involving board size, chief executive officer (CEO) board membership, and board independence. The principal findings remain broadly robust across alternative specifications and endogeneity analyses. Based on these findings, the study offers practical implications for bank managers and policymakers regarding board composition and expertise, ownership-related governance, and regulatory support for effective and sustainable bank digital transformation.