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Firm performance in the financial industry: the role of foreign entrants and their origin

Dao Thi Hong Nguyen (College of Business, Law and Governance (James Cook University) and Faculty of Economics (Nha Trang University), Nha Trang, Vietnam)

Multinational Business Review

ISSN: 1525-383X

Article publication date: 8 March 2021

Issue publication date: 13 July 2021




This study aims to provide firm-level evidence on the relationship between the presence of financial services multinationals and indigenous counterparts’ performance, using a comprehensive sample of firms in the emerging financial industry in Vietnam.


This study uses the generalized method of moments with instrumental variables (IV/GMM) to deal with potential endogeneity problem. Of this technique, a pragmatic approach to constructing instruments is adopted, capitalizing on the geographical and industry segmentation of the local market. The empirical analyses also address statistical issues of the overall model significance, heteroskedasticity and multicollinearity.


The regression results reveal that foreign entrants have a positive and statistically significant association with indigenous firms’ labor productivity and the average wage, with a more pronounced impact on the latter. The increased entry of financial multinationals appears to be uncorrelated with indigenous firms’ profitability. The extended estimations also suggest that investor origin matters in determining spillover magnitude. The average estimate of Asian affiliates in the examined relationship is approximately half that of European affiliates, whereas foreign entrants originating from America show an insignificant role.


This study sheds light on the broader impacts of foreign financial affiliates by simultaneously exploring their impacts on three key dimensions of indigenous firm performance, namely, labor productivity, average wage and profitability. This paper also enriches the existing literature by disentangling the effects of foreign entrants from different regions of origin, which was largely neglected in the context of financial services multinationals.



The author would like to thank the participants at the CBLG Research Seminar (James Cook University, April 2020), Chang Hoon Oh (Editor-in-chief) and two anonymous reviewers for valuable and constructive feedback, which have greatly improved the quality of the paper. All remaining errors and omissions are the author’s sole responsibility.


Nguyen, D.T.H. (2021), "Firm performance in the financial industry: the role of foreign entrants and their origin", Multinational Business Review, Vol. 29 No. 3, pp. 397-419.



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