Innovation Capabilities in the Banking Sector Post-COVID-19 Period: The Moderating Role of Corporate Governance in an Emerging Country

Abstract

The COVID-19 pandemic is damaging economies across the world, including financial markets and institutions in all possible dimensions. For banks in particular, the pandemic generates multifaceted crises. This is likely to be worse in developing economies with poor financial market architecture. Innovation is considered an important factor in organizational effectiveness and competitive advantage post-COVID-19. Understanding how the banking system can improve their innovation capabilities is an unsolved question, especially in an emerging economy. Hence, this paper aims to examine the impact of capital budgeting, knowledge management, and business strategy on innovation capabilities in the Vietnamese banking sector post-COVID-19. More specifically, this study investigates the moderating role of corporate governance in strengthening these proposed impacts. This research uses a sample of 23 listed banks in Vietnam to examine the moderating role of corporate governance in the context of an emerging country. Hierarchical regression analysis and the multiple indicator approach are employed. The results indicate that knowledge management and business strategy significantly impact innovation capabilities while capital budgeting has no effect. Corporate governance has been revealed as the moderator of the relationship between two factors (knowledge management and business strategy) and innovation capabilities.