Digital Transformation and Risk-taking in Vietnamese Banks: A Principal-agent Perspective

Abstract

This study applies the principal-agent framework to examine the impact of digital transformation on banks’ risk-taking behavior in Vietnam in 2012–2022. It further expands the analysis by investigating the moderating roles of bank-specific characteristics and external shocks in this relationship. The results reveal a nonlinear, U-shaped relationship: in the early stages of digital transformation, heightened information asymmetry intensifies principal-agent conflicts, thereby reducing risk-taking. As digital maturity increases, moral hazard becomes more prominent, encouraging greater risk-taking as agents respond to performance-based incentives. Furthermore, larger banks tend to exhibit more conservative behavior due to their complex organizational structures and divergent risk perceptions, while the COVID-19 pandemic coupled with rapid technological change has amplified risk aversion across the sector. These findings offer important implications for corporate financial decision-making and regulatory policy, emphasizing the need to manage agency conflicts and align digital strategies with optimal risk-taking behavior in the evolving digital finance landscape.