Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024)

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Please see the attachment.

Author Response

1. The study addresses a novel issue by simultaneously analyzing how different investment channels impact commercial bank profitability, an area that has not been extensively explored.
2. The use of System-GMM is appropriate given the presence of endogeneity in banking data, enhancing the reliability of the results. The author has estimated a dynamic panel but the equation shows a static version. This should be corrected. Further, the fact that a lagged dependent variable is present in the model, makes pooled, FE and RE inappropriate. The author edited at line 232.
3. There is no indication in the text whether a one-step or a two-step estimator is used! The author presents this in lines 17-18 of Table 5 in line 295 of the paper.
4. The author presents the results of autocorrelation and endogeneity tests. What about heteroscedasticity in residuals? It is possible to account for autocorrelation and heteroscedasticity by clustering standard errors for banks!! This should be made clear in the paper! The author edited at line 286 of Table 4.
5. I assume that the author followed Roodman (2009a, 2009b) when applying System-GMM. There should be an indication of variables that are supposed to be endogenous (other than the lagged dependent variable); predetermined, and exogenous. The author should refer to economic intuition and some related publications to justify this. The author edited at line 227 – 231.
6. The study leverages an extensive dataset covering 27 commercial banks over multiple quarters. There should be a rationale behind the choice of the starting point (2018Q1)! The author edited at line 211 – 219.
7. The author did not give an interpretation of the results related to variables X9, X10, and X11! Policy implications of those results should also be added! The author edited at line 307, 315, 317.
8. The findings should provide valuable insights for bank managers and policymakers in optimizing investment strategies. 
9. The study does not clearly articulate the theoretical underpinnings guiding the analysis. Discussing relevant financial theories, such as modern portfolio theory or bank risk-return trade-offs, would strengthen the argument. The author has not found any suitable theory to explain so it has not been added.
10. While the study identifies key investment channels, it lacks an explicit justification for their inclusion. A more detailed rationale based on previous literature would improve clarity. The author uses the relationship of items on the Income Statement of commercial banks as prescribed by the Ministry of Finance of Vietnam to explain 7 independent variables, which are profit-making activities, from X1 to X7 of the research model. The control variables from X8 to X11 are explained from previous research results. Therefore, the author does not use background theories to explain the research model.
11. Although S-GMM addresses endogeneity, a stronger discussion on causal interpretation would enhance credibility. Potential robustness checks, such as instrumental variable approaches or alternative specifications, could be considered. I suggest to add results by varying the dependent variable. The author can use Return on Equity (ROE) as the dependent variables or Return on Assets adjusted for Risk, Return on Equity adjusted for risk, etc. Robustness analysis is a standard in empirical analysis to strengthen the reliability of the results. The author argues for using ROA to evaluate the performance of commercial banks in lines 91 – 97.
12. The impact of economic growth and systemic risk on bank profits is mentioned twice, in the abstract. The author has checked for duplication.
13. While the study proposes solutions, it does not elaborate on their feasibility or implementation challenges. Providing concrete examples or comparative insights from other banking systems would improve the practical contribution. The study is based on commercial bank data, so the author has given policy implications on pages 348 – 352. The author also explains about investment channels that have not had any impact on banking performance in lines 340 – 344.
14. Detailed definitions of acronyms should be given first time they are used then keep their usage in the remaining part of the text. This applies to GMM, S-GMM, FGLS, FEM, and REM! The author edited at line 250 – 255.
15. In p.4, line 161, please correct: “The study was conducted from the first quarter of 2018 …”! Thanks, the author edited at line 220.
16. In p.9, lines 255-256, the sentence “While systemic risks will limit the profitability of commercial banks, 255 similar to the research of Nguyen (2024) and Eken et al (2012)” should be rewritten! Thank, author edited at line 221-222.
17. The authors depict similarities with previous findings but do not mention whether there are disparities with existing literature! Usually, different results are used to argue the reason for the research. This research of the author does not originate from the difference in research results, so the author does not relate the explanation in this direction. 
18. Table 1 is not cited in the text! Table 1 is the author's summary information collection section, with the source cited in line 236.
19. Please ensure the same labeling throughout the tables. For instance, ROA is denoted Y, then it is labeled again as ROA! Thanks, the author edited all paper.
20. The author should clarify the references mentioned in Table 1 as sources. ROA is a measure constructed by the author. Does mentioning references mean that the author followed the methodology of other authors or did he/she get data from those authors? The same applies to the dummy variable X10! The author has updated the X11 variable information in table 1.
21. Limitations of the study and future perspectives should be mentioned in the “Conclusions” Section. The author added at line 253 – 259.

Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

Thank you for allowing me to review this Manuscript entitled “Profitable Investment Channels Of Vietnamese Commercial 2 Banks (2018-2024)". The topic is engaging, and the researchers have made a solid attempt. However, there are several issues that need to be addressed in order to enhance the quality of the paper.

Abstract

The abstract should include the motivation, research objective, data, methodology used, key findings, and implications to ensure clarity and coherence.

1. Introduction

(1). The introduction requires enhancement in articulating strengths, motivations, and rationale for the commercial banks' selection. It should distinctly establish the study's necessity instead of resembling a literature review. The background of the study needs stronger justification, emphasizing its relevance and contributions to the empirical literature. The paper's contributions should be articulated, highlighting how the study differs from others and its significance. The significance of the study must not be neglected, and the novelty, and significance should be incorporated into the Introduction.

(2). Briefly state the key findings from your study to strengthen the contribution of your manuscript.

(3). The structure of the paper is not highlighted in the introduction section. Even though the authors have numbered the sections and subsections, it is advisable to include the paper structure at the end of the introduction section.

2. Literature review

In this section, the studies chosen are recent and relevant to the topic. Nevertheless, the section is too descriptive and lacks a critical approach. Please critically discuss the current literature to emphasize the gaps and explain how your research fills these gaps. Expand the literature coverage, as there are other studies discussing the issues that need to be included in this manuscript.  Please improve this section.

3. Research Model

The methodology employed is appropriate. However, the methodology is not clearly explained.   The econometric tool (s) used included S-GMM. The author should have identified that tool(s) and explained it stating reasons why it is the best approach for the paper. In other words, the authors should justify why they chose this method over other available approaches.

 

4. Results and Discussion:

The results are presented clearly and analyzed appropriately. However, the discussion of your results needs to be improved by adding critical evaluation and comparison with previous investigations related to the topic. The authors have linked the findings of their study with some previous empirical works, but they are not enough. Also, the authors did not consider the previous works that conflict with their findings.

The discussion lacks a critical synthesis and comparison with the literature. The purpose of the discussion section is to interpret and describe the significance of your findings in relation to what was already known about the research problem being investigated and explain any new understanding or insights that emerged from your research.  Kindly add in the discussion section the critical evaluation of previous findings (works) that conflict or contradict with yours. This will enhance the discussion of your results.

 

5. Conclusion

The conclusion of the paper is well structured and articulated. However, the authors failed to highlight the limitations of the study and potential future research directions. Therefore, this section needs to be improved by highlighting the limitations, and future research directions.

Overall, please improve the quality of the manuscript by considering all comments and suggestions highlighted by the reviewer.

Author Response

Abstract: The abstract should include the motivation, research objective, data, methodology used, key findings, and implications to ensure clarity and coherence. The author edited at line 13 – 20

1. Introduction

(1). The introduction requires enhancement in articulating strengths, motivations, and rationale for the commercial banks' selection. It should distinctly establish the study's necessity instead of resembling a literature review. The background of the study needs stronger justification, emphasizing its relevance and contributions to the empirical literature. The paper's contributions should be articulated, highlighting how the study differs from others and its significance. The significance of the study must not be neglected, and the novelty, and significance should be incorporated into the Introduction. The author edited at line 33 – 39, 43 – 60

(2). Briefly state the key findings from your study to strengthen the contribution of your manuscript. The author edited at line 327 – 331, 345 – 347.

(3). The structure of the paper is not highlighted in the introduction section. Even though the authors have numbered the sections and subsections, it is advisable to include the paper structure at the end of the introduction section. The author added at line 82 – 85.

2. Literature review

In this section, the studies chosen are recent and relevant to the topic. Nevertheless, the section is too descriptive and lacks a critical approach. Please critically discuss the current literature to emphasize the gaps and explain how your research fills these gaps. Expand the literature coverage, as there are other studies discussing the issues that need to be included in this manuscript.  Please improve this section. The author added at line 105 – 109, 122 – 134, 151 – 154.

3. Research Model

The methodology employed is appropriate. However, the methodology is not clearly explained.   The econometric tool (s) used included S-GMM. The author should have identified that tool(s) and explained it stating reasons why it is the best approach for the paper. In other words, the authors should justify why they chose this method over other available approaches. The author edited at line 227 – 231, 255 – 259.

4. Results and Discussion:

The results are presented clearly and analyzed appropriately. However, the discussion of your results needs to be improved by adding critical evaluation and comparison with previous investigations related to the topic. The authors have linked the findings of their study with some previous empirical works, but they are not enough. Also, the authors did not consider the previous works that conflict with their findings. Usually, different results are used to argue the reason for the research. This research of the author does not originate from the difference in research results, so the author does not relate the explanation in this direction.

5. Conclusion

The conclusion of the paper is well structured and articulated. However, the authors failed to highlight the limitations of the study and potential future research directions. Therefore, this section needs to be improved by highlighting the limitations, and future research directions. The author added at line 253 – 259.

Overall, please improve the quality of the manuscript by considering all comments and suggestions highlighted by the reviewer.

Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

The paper aims at empirical investigation of the profitability of the commercial banks’ investment channels in the Vietnamese market. Although the subject may look potentially appealing, its realization in the study exhibits some serious flaws which require a deep reconsideration and further elaboration:

• although the Author argues that ‘This study was conducted from the perspective of managers in commercial banks to consider which investment channel has a stable impact on bank profits over a long period of bank management’ (see lines 13-15), the research framework of the study actually presents rather the perspective of the entire market since the employed multiple regression model estimates the average impact of the explanatory variables on the return on assets across the whole examined sample and not the individual banks;
• in lines 29-32, the Author argues that “Commercial banks are enterprises that trade on special products, especially currency. In addition to prominent channels of investment that generate profit from currency such as lending, investing in securities, and contributing capital for business, commercial banks also provide non-cash payment services.” – the order of the above considerations is, however, somewhat unusual, as bank trading activities are listed before their lending and deposit-taking activities;
• in lines 53-55, the Author claims that “… there has been no study conducted on the role of bank managers, examining how all bank activities from business to investment affect bank profitability. Therefore, this study will evaluate the impact of all investment and business activities of commercial banks over a long period to see which activities contribute to increasing the profit level of Vietnamese commercial banks.” – again, there is an evident inconsistency there, as the empirical research is not actually aiming at investigating the role of managers but rather the average contribution of the distinguished explanatory variables to the return on assets in the Vietnamese banking sector. Given the above, the introduction section lacks an unequivocal and consistent formulation of the goal of the study;
• in the closing paragraph of the introduction section, the Author should briefly describe the structure of the remainder of the paper;
• in lines 100-102 the Author argues again that: “…no study has examined separately how commercial banks' business and investment activities contribute to the overall profitability of the bank” – even though the empirical evidence presented in the study regards the averages across the entire examined sample of banks, not their individual performance;
• the literature review is very superficial, the identified gap in the relevant literature is largely debatable and does not seem to correspond to the research design adopted in the study;
• the manuscript completely lacks a formal development of the research hypotheses, which is highly unusual for a research paper;
• the definitions of ‘profit margins’ for variables X₁-X₆ in Table 1 (p. 4-5) are somewhat problematic as they capture the shares of different components of banks’ earnings in their total operating income rather than actual margins. For instance, if we divide net income from foreign exchange trading by the entire total operating income, we will get a biased result since the denominator of the fraction is shaped by a multitude of other activities performed by the bank over the period, including lending, deposit taking, securities trading, etc.;
• given the fact that the research is using quarterly data, it seems advisable to address the presence of seasonality in the examined drivers of bank returns;
• in lines 201-205, while discussing the volatility of the explanatory variables, the Author seems to focus on the absolute dispersion (as measured by the standard deviation) instead of the relative one (as measured by coefficient of variability), which would be more appropriate;
• the values for the binary variable X₁₁ in Table 2 are rather not reported in percentage numbers, as suggested by the header of the first column;
• in Table 3 (p. 6), I would recommend adding the p-values to the estimated correlation coefficients or highlighting the statistically significant estimates otherwise; in addition, it is highly advisable to perform additional tests for the presence of multicollinearity, besides the criterion suggested by Evans (1996) in lines 211-213, e.g. based on variance inflation factors (VIF).

Overall, the results of the study are hardly surprising and largely trivial as they demonstrate that, on the one hand, most of the activities conducted by commercial banks in Vietnam (lending, services, FX trading, investment securities trading, other operations) and economic growth exert positive impact on their profitability, while, on the other hand, loan provisions affect it negatively. The Author also finds short-term securities trading and investments in shares to have insignificant impact on profitability without, however, recognising the fact that these activities may actually serve different purposes – as the former may be more related to liquidity management, and the latter may be oriented towards long-term returns, which might not be visible in the quarter-by-quarter type of analysis. Moreover, the above general results represent the developments occurring on average in the entire examined sample and actually provide little value-added for the management of an individual bank, especially as the data on minimum values and dispersion of the bank-specific characteristics given in Table 2 (p. 6) demonstrates that the individual performance of the examined banks is very diversified and may sometimes exhibit exactly opposite effects to the ones predicted by the estimated model.

To sum up, the paper does not offer a meaningful contribution to the field of study, and its overall research design seems to require a thorough re-elaboration. Unfortunately, the above shortcomings do not allow its current version to be considered for publication.

Comments on the Quality of English Language

Although the language used in the paper is generally comprehensible, I would strongly recommend having the paper proofread by a native speaker to improve the style (see e.g. ‘trading securities activities’ instead of ‘securities trading activities’ in line 129; ‘collected from Author’ in line 173; ‘there is an endogenous phenomenon” in Table 4, p. 6), spelling (see e.g. ‘servisce’ in the formula for variable X3 in Table 1 on p. 4) and wording (see e.g. ‘earning’ instead of ‘earnings’ in the formula for variable X2 in Table 1 on p. 4). Moreover, in line 161, it should be ‘2018’ instead of ‘2028’.

Author Response

The paper aims at empirical investigation of the profitability of the commercial banks’ investment channels in the Vietnamese market. Although the subject may look potentially appealing, its realization in the study exhibits some serious flaws which require a deep reconsideration and further elaboration:

   - Although the Author argues that ‘This study was conducted from the perspective of managers in commercial banks to consider which investment channel has a stable impact on bank profits over a long period of bank management’ (see lines 13-15), the research framework of the study actually presents rather the perspective of the entire market since the employed multiple regression model estimates the average impact of the explanatory variables on the return on assets across the whole examined sample and not the individual banks; The author edited at line 18 – 20, 45 – 49, 50 – 60.

    - In lines 29-32, the Author argues that “Commercial banks are enterprises that trade on special products, especially currency. In addition to prominent channels of investment that generate profit from currency such as lending, investing in securities, and contributing capital for business, commercial banks also provide non-cash payment services.” – the order of the above considerations is, however, somewhat unusual, as bank trading activities are listed before their lending and deposit-taking activities; The author edited at line 33 – 39.

   - In lines 53-55, the Author claims that “… there has been no study conducted on the role of bank managers, examining how all bank activities from business to investment affect bank profitability. Therefore, this study will evaluate the impact of all investment and business activities of commercial banks over a long period to see which activities contribute to increasing the profit level of Vietnamese commercial banks.” – again, there is an evident inconsistency there, as the empirical research is not actually aiming at investigating the role of managers but rather the average contribution of the distinguished explanatory variables to the return on assets in the Vietnamese banking sector. Given the above, the introduction section lacks an unequivocal and consistent formulation of the goal of the study; The author edited at line 56 – 60.

  -  In the closing paragraph of the introduction section, the Author should briefly describe the structure of the remainder of the paper; The author edited at line 82 – 85.

   - In lines 100-102 the Author argues again that: “…no study has examined separately how commercial banks' business and investment activities contribute to the overall profitability of the bank” – even though the empirical evidence presented in the study regards the averages across the entire examined sample of banks, not their individual performance; The author edited at line 131 – 134.

   - The literature review is very superficial, the identified gap in the relevant literature is largely debatable and does not seem to correspond to the research design adopted in the study; The author added at line 105 – 109, 122 – 134, 151 – 154.

  -  The manuscript completely lacks a formal development of the research hypotheses, which is highly unusual for a research paper; The author uses the relationship of items on the Income Statement of commercial banks as prescribed by the Ministry of Finance of Vietnam to explain 7 independent variables, which are profit-making activities, from X1 to X7 of the research model. The control variables from X8 to X11 are explained from previous research results. Therefore, the author does not use background theories to explain the research model.

   - The definitions of ‘profit margins’ for variables X1-X6 in Table 1 (p. 4-5) are somewhat problematic as they capture the shares of different components of banks’ earnings in their total operating income rather than actual margins. For instance, if we divide net income from foreign exchange trading by the entire total operating income, we will get a biased result since the denominator of the fraction is shaped by a multitude of other activities performed by the bank over the period, including lending, deposit taking, securities trading, etc.; According to the business results report, the total operating profit of commercial banks includes all 7 activities listed from lines 161 - 189. This is the basis for explaining the equation. The study uses the variable of the profit ratio of each activity contributing to the total profit of commercial banks in the period, from X1 to X7. Variable Y is a measure of the profit ratio of commercial banks after tax compared to total assets. The equation is determined based on the profit ratio of each activity and has additional control variables. Therefore, it cannot be said that the model has deviations.

   - Given the fact that the research is using quarterly data, it seems advisable to address the presence of seasonality in the examined drivers of bank returns; The author does not share this view with the opponent. Managers analyze the unit's finances in short cycles to detect limitations early and promptly handle them. Therefore, quarterly data analysis is suitable for financial managers' decision making.

   - In lines 201-205, while discussing the volatility of the explanatory variables, the Author seems to focus on the absolute dispersion (as measured by the standard deviation) instead of the relative one (as measured by coefficient of variability), which would be more appropriate; Absolute analysis is often chosen by analysts to explain descriptive statistics of variables in a model. Therefore, the author chooses absolute analysis.

  -  The values for the binary variable X11 in Table 2 are rather not reported in percentage numbers, as suggested by the header of the first column; The author has updated the units in table 2.

  - In Table 3 (p. 6), I would recommend adding the p-values to the estimated correlation coefficients or highlighting the statistically significant estimates otherwise; in addition, it is highly advisable to perform additional tests for the presence of multicollinearity, besides the criterion suggested by Evans (1996) in lines 211-213, e.g. based on variance inflation factors (VIF). The correlation coefficient table for the model has 12 variables, so it is difficult to show more statistical significance due to the width of the table compared to the page. The author also shows the necessary tests to check the errors of the model. Currently, the article also shows the correlation coefficient table and autocorrelation test. In the model, there is a lag variable of the dependent variable, so multicollinearity is certain to occur. The estimation method used is S-GMM, so this error can be overcome. Therefore, the author does not show the results of the multicollinearity test.

Overall, the results of the study are hardly surprising and largely trivial as they demonstrate that, on the one hand, most of the activities conducted by commercial banks in Vietnam (lending, services, FX trading, investment securities trading, other operations) and economic growth exert positive impact on their profitability, while, on the other hand, loan provisions affect it negatively. The Author also finds short-term securities trading and investments in shares to have insignificant impact on profitability without, however, recognising the fact that these activities may actually serve different purposes – as the former may be more related to liquidity management, and the latter may be oriented towards long-term returns, which might not be visible in the quarter-by-quarter type of analysis. Moreover, the above general results represent the developments occurring on average in the entire examined sample and actually provide little value-added for the management of an individual bank, especially as the data on minimum values and dispersion of the bank-specific characteristics given in Table 2 (p. 6) demonstrates that the individual performance of the examined banks is very diversified and may sometimes exhibit exactly opposite effects to the ones predicted by the estimated model. I have argued strongly about the research context and the novelty of the topic. Therefore, I do not agree with the author's point of view.

To sum up, the paper does not offer a meaningful contribution to the field of study, and its overall research design seems to require a thorough re-elaboration. Unfortunately, the above shortcomings do not allow its current version to be considered for publication. I have argued strongly about the research context and the novelty of the topic. Therefore, I do not agree with the author's point of view.

Comments on the Quality of English Language: Although the language used in the paper is generally comprehensible, I would strongly recommend having the paper proofread by a native speaker to improve the style (see e.g. ‘trading securities activities’ instead of ‘securities trading activities’ in line 129; ‘collected from Author’ in line 173; ‘there is an endogenous phenomenon” in Table 4, p. 6), spelling (see e.g. ‘servisce’ in the formula for variable X3 in Table 1 on p. 4) and wording (see e.g. ‘earning’ instead of ‘earnings’ in the formula for variable X2 in Table 1 on p. 4). Moreover, in line 161, it should be ‘2018’ instead of ‘2028’.

The author edited at line 220.

The entire content of the previous article also used MDPI's editorial services.

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

I have carefully read the revised version. While there is some improvement, many of my previous comments are not addressed. Please note that those points are required to meet the publication levels of a journal.

1- The paper's absence of theoretical foundations is a serious concern. There is no empirical research without a basis that justifies the econometric modeling and the relationship between variables. For the determinants of bank performance, one can rely on the market power and efficiency structure. 

2- It does not make sense to test for heteroscedasticity in random and fixed effects models while the regression is a dynamic panel that is estimated by System-GMM. Those tests are needless. The author has to control for serial correlation and heteroscedasticity in residuals by clustering (for banks) the standard errors. This means a re-estimation of the model (this means obtaining other results and another interpretation).

3- The author did not precise what variables are considered endogenous, predetermined, and exogenous (asked in my previous report). I also recommend to classify the variables into internal/external, bank-specific, industry-specific, and macroeconomic.

4- Return on equity, and the net interest margin are quite measures of bank performance. The robustness analysis (missing again in the revision) is mandatory to validate the results. Otherwise, the author can do some sensitivity analysis!

5- The author confuses research gaps with the comparison of the results with previous literature. Research gaps reflect what is not done and then justify the contribution of the current study before knowing the results. Then, a comparison of the findings should be made in the discussion section. The comparison detects similarities and disparities. In the latter case, the author should provide reasons why his findings differ from existing studies.

6- Policy implications of the findings are also absent in the revised version. These should be added thoroughly in the discussion section.

Comments for author File: Comments.pdf

Author Response

1. The study addresses a novel issue by simultaneously analyzing how different investment channels impact commercial bank profitability, an area that has not been extensively explored.
2. The use of System-GMM is appropriate given the presence of endogeneity in banking data, enhancing the reliability of the results. The author has estimated a dynamic panel but the equation shows a static version. This should be corrected. Further, the fact that a lagged dependent variable is present in the model, makes pooled, FE and RE inappropriate. The author edited at line 232.
3. There is no indication in the text whether a one-step or a two-step estimator is used! The author presents this in lines 17-18 of Table 5 in line 295 of the paper.
4. The author presents the results of autocorrelation and endogeneity tests. What about heteroscedasticity in residuals? It is possible to account for autocorrelation and heteroscedasticity by clustering standard errors for banks!! This should be made clear in the paper! The author edited at line 286 of Table 4.
5. I assume that the author followed Roodman (2009a, 2009b) when applying System-GMM. There should be an indication of variables that are supposed to be endogenous (other than the lagged dependent variable); predetermined, and exogenous. The author should refer to economic intuition and some related publications to justify this. The author edited at line 227 – 231.
6. The study leverages an extensive dataset covering 27 commercial banks over multiple quarters. There should be a rationale behind the choice of the starting point (2018Q1)! The author edited at line 211 – 219.
7. The author did not give an interpretation of the results related to variables X9, X10, and X11! Policy implications of those results should also be added! The author edited at line 307, 315, 317.
8. The findings should provide valuable insights for bank managers and policymakers in optimizing investment strategies. 
9. The study does not clearly articulate the theoretical underpinnings guiding the analysis. Discussing relevant financial theories, such as modern portfolio theory or bank risk-return trade-offs, would strengthen the argument. The author has not found any suitable theory to explain so it has not been added.
10. While the study identifies key investment channels, it lacks an explicit justification for their inclusion. A more detailed rationale based on previous literature would improve clarity. The author uses the relationship of items on the Income Statement of commercial banks as prescribed by the Ministry of Finance of Vietnam to explain 7 independent variables, which are profit-making activities, from X1 to X7 of the research model. The control variables from X8 to X11 are explained from previous research results. Therefore, the author does not use background theories to explain the research model.
11. Although S-GMM addresses endogeneity, a stronger discussion on causal interpretation would enhance credibility. Potential robustness checks, such as instrumental variable approaches or alternative specifications, could be considered. I suggest to add results by varying the dependent variable. The author can use Return on Equity (ROE) as the dependent variables or Return on Assets adjusted for Risk, Return on Equity adjusted for risk, etc. Robustness analysis is a standard in empirical analysis to strengthen the reliability of the results. The author argues for using ROA to evaluate the performance of commercial banks in lines 91 – 97.
12. The impact of economic growth and systemic risk on bank profits is mentioned twice, in the abstract. The author has checked for duplication.
13. While the study proposes solutions, it does not elaborate on their feasibility or implementation challenges. Providing concrete examples or comparative insights from other banking systems would improve the practical contribution. The study is based on commercial bank data, so the author has given policy implications on pages 348 – 352. The author also explains about investment channels that have not had any impact on banking performance in lines 340 – 344.
14. Detailed definitions of acronyms should be given first time they are used then keep their usage in the remaining part of the text. This applies to GMM, S-GMM, FGLS, FEM, and REM! The author edited at line 250 – 255.
15. In p.4, line 161, please correct: “The study was conducted from the first quarter of 2018 …”! Thanks, the author edited at line 220.
16. In p.9, lines 255-256, the sentence “While systemic risks will limit the profitability of commercial banks, 255 similar to the research of Nguyen (2024) and Eken et al (2012)” should be rewritten! Thank, author edited at line 221-222.
17. The authors depict similarities with previous findings but do not mention whether there are disparities with existing literature! Usually, different results are used to argue the reason for the research. This research of the author does not originate from the difference in research results, so the author does not relate the explanation in this direction. 
18. Table 1 is not cited in the text! Table 1 is the author's summary information collection section, with the source cited in line 236.
19. Please ensure the same labeling throughout the tables. For instance, ROA is denoted Y, then it is labeled again as ROA! Thanks, the author edited all paper.
20. The author should clarify the references mentioned in Table 1 as sources. ROA is a measure constructed by the author. Does mentioning references mean that the author followed the methodology of other authors or did he/she get data from those authors? The same applies to the dummy variable X10! The author has updated the X11 variable information in table 1.
21. Limitations of the study and future perspectives should be mentioned in the “Conclusions” Section. The author added at line 253 – 259.

Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

The author has improved the paper significantly and I appreciate his/her efforts.
Therefore, there are no specific or additional comments. 

Author Response

Abstract: The abstract should include the motivation, research objective, data, methodology used, key findings, and implications to ensure clarity and coherence. The author edited at line 13 – 20

1. Introduction

(1). The introduction requires enhancement in articulating strengths, motivations, and rationale for the commercial banks' selection. It should distinctly establish the study's necessity instead of resembling a literature review. The background of the study needs stronger justification, emphasizing its relevance and contributions to the empirical literature. The paper's contributions should be articulated, highlighting how the study differs from others and its significance. The significance of the study must not be neglected, and the novelty, and significance should be incorporated into the Introduction. The author edited at line 33 – 39, 43 – 60

(2). Briefly state the key findings from your study to strengthen the contribution of your manuscript. The author edited at line 327 – 331, 345 – 347.

(3). The structure of the paper is not highlighted in the introduction section. Even though the authors have numbered the sections and subsections, it is advisable to include the paper structure at the end of the introduction section. The author added at line 82 – 85.

2. Literature review

In this section, the studies chosen are recent and relevant to the topic. Nevertheless, the section is too descriptive and lacks a critical approach. Please critically discuss the current literature to emphasize the gaps and explain how your research fills these gaps. Expand the literature coverage, as there are other studies discussing the issues that need to be included in this manuscript.  Please improve this section. The author added at line 105 – 109, 122 – 134, 151 – 154.

3. Research Model

The methodology employed is appropriate. However, the methodology is not clearly explained.   The econometric tool (s) used included S-GMM. The author should have identified that tool(s) and explained it stating reasons why it is the best approach for the paper. In other words, the authors should justify why they chose this method over other available approaches. The author edited at line 227 – 231, 255 – 259.

4. Results and Discussion:

The results are presented clearly and analyzed appropriately. However, the discussion of your results needs to be improved by adding critical evaluation and comparison with previous investigations related to the topic. The authors have linked the findings of their study with some previous empirical works, but they are not enough. Also, the authors did not consider the previous works that conflict with their findings. Usually, different results are used to argue the reason for the research. This research of the author does not originate from the difference in research results, so the author does not relate the explanation in this direction.

5. Conclusion

The conclusion of the paper is well structured and articulated. However, the authors failed to highlight the limitations of the study and potential future research directions. Therefore, this section needs to be improved by highlighting the limitations, and future research directions. The author added at line 253 – 259.

Overall, please improve the quality of the manuscript by considering all comments and suggestions highlighted by the reviewer.

Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

The revised manuscript incorporates some amendments regarding the formulation of its scope and the interpretation of the obtained results, which have undoubtedly improved the overall coherence of the study. However, the following issues remain unresolved:

1. The paper still does not propose any research hypotheses regarding the determinants of profitability in the Vietnamese banking sector. The formulation of hypotheses is a crucial element of scientific investigation and a standard component of research papers. Hypotheses should mediate between the gap identified in the literature and the empirical approach proposed to address it.
2. The author refers to variables X₂–X₆ as “profit margins,” even though the numerators of the fractions used to calculate them include only income from the respective activities, without adjusting for costs. For a variable to represent an actual margin, the numerator should employ net income (i.e., income minus cost), as is done in the case of variable X₁. Otherwise, the variable reflects the share of income from a given activity in the bank’s total operating income rather than an actual margin.
3. Table 3 still does not present the statistical significance of the correlation coefficients between the model variables. Without this, the informativeness of the table remains limited. Moreover, contrary to the author's response in the first-round review, adding p-values below the estimates (e.g., in brackets, as is typically done) should not pose significant difficulties. Additionally, given that the author has chosen to present these correlations in the paper, including an additional test for the significance of multicollinearity between regressors would enhance the transparency of the research framework, regardless of the robust estimation technique used.

Overall, despite some improvements in research design, the revised study's scientific value-added remains marginal. The results are largely trivial and lack deeper interpretation, as indicated in the first-round review. Nonetheless, the study may appeal to readers interested in the specific context of the Vietnamese banking sector.

Comments on the Quality of English Language

The manuscript still requires thorough proofreading, particularly in the newly added passages, with attention to grammar (e.g., lines 122–125), punctuation (e.g., lines 96, 199, 210), spelling (e.g., “servisce” in the formula for variable X2 in Table 1), and style (e.g., lines 13–14).

Author Response

The paper aims at empirical investigation of the profitability of the commercial banks’ investment channels in the Vietnamese market. Although the subject may look potentially appealing, its realization in the study exhibits some serious flaws which require a deep reconsideration and further elaboration:

   - Although the Author argues that ‘This study was conducted from the perspective of managers in commercial banks to consider which investment channel has a stable impact on bank profits over a long period of bank management’ (see lines 13-15), the research framework of the study actually presents rather the perspective of the entire market since the employed multiple regression model estimates the average impact of the explanatory variables on the return on assets across the whole examined sample and not the individual banks; The author edited at line 18 – 20, 45 – 49, 50 – 60.

    - In lines 29-32, the Author argues that “Commercial banks are enterprises that trade on special products, especially currency. In addition to prominent channels of investment that generate profit from currency such as lending, investing in securities, and contributing capital for business, commercial banks also provide non-cash payment services.” – the order of the above considerations is, however, somewhat unusual, as bank trading activities are listed before their lending and deposit-taking activities; The author edited at line 33 – 39.

   - In lines 53-55, the Author claims that “… there has been no study conducted on the role of bank managers, examining how all bank activities from business to investment affect bank profitability. Therefore, this study will evaluate the impact of all investment and business activities of commercial banks over a long period to see which activities contribute to increasing the profit level of Vietnamese commercial banks.” – again, there is an evident inconsistency there, as the empirical research is not actually aiming at investigating the role of managers but rather the average contribution of the distinguished explanatory variables to the return on assets in the Vietnamese banking sector. Given the above, the introduction section lacks an unequivocal and consistent formulation of the goal of the study; The author edited at line 56 – 60.

  -  In the closing paragraph of the introduction section, the Author should briefly describe the structure of the remainder of the paper; The author edited at line 82 – 85.

   - In lines 100-102 the Author argues again that: “…no study has examined separately how commercial banks' business and investment activities contribute to the overall profitability of the bank” – even though the empirical evidence presented in the study regards the averages across the entire examined sample of banks, not their individual performance; The author edited at line 131 – 134.

   - The literature review is very superficial, the identified gap in the relevant literature is largely debatable and does not seem to correspond to the research design adopted in the study; The author added at line 105 – 109, 122 – 134, 151 – 154.

  -  The manuscript completely lacks a formal development of the research hypotheses, which is highly unusual for a research paper; The author uses the relationship of items on the Income Statement of commercial banks as prescribed by the Ministry of Finance of Vietnam to explain 7 independent variables, which are profit-making activities, from X1 to X7 of the research model. The control variables from X8 to X11 are explained from previous research results. Therefore, the author does not use background theories to explain the research model.

   - The definitions of ‘profit margins’ for variables X1-X6 in Table 1 (p. 4-5) are somewhat problematic as they capture the shares of different components of banks’ earnings in their total operating income rather than actual margins. For instance, if we divide net income from foreign exchange trading by the entire total operating income, we will get a biased result since the denominator of the fraction is shaped by a multitude of other activities performed by the bank over the period, including lending, deposit taking, securities trading, etc.; According to the business results report, the total operating profit of commercial banks includes all 7 activities listed from lines 161 - 189. This is the basis for explaining the equation. The study uses the variable of the profit ratio of each activity contributing to the total profit of commercial banks in the period, from X1 to X7. Variable Y is a measure of the profit ratio of commercial banks after tax compared to total assets. The equation is determined based on the profit ratio of each activity and has additional control variables. Therefore, it cannot be said that the model has deviations.

   - Given the fact that the research is using quarterly data, it seems advisable to address the presence of seasonality in the examined drivers of bank returns; The author does not share this view with the opponent. Managers analyze the unit's finances in short cycles to detect limitations early and promptly handle them. Therefore, quarterly data analysis is suitable for financial managers' decision making.

   - In lines 201-205, while discussing the volatility of the explanatory variables, the Author seems to focus on the absolute dispersion (as measured by the standard deviation) instead of the relative one (as measured by coefficient of variability), which would be more appropriate; Absolute analysis is often chosen by analysts to explain descriptive statistics of variables in a model. Therefore, the author chooses absolute analysis.

  -  The values for the binary variable X11 in Table 2 are rather not reported in percentage numbers, as suggested by the header of the first column; The author has updated the units in table 2.

  - In Table 3 (p. 6), I would recommend adding the p-values to the estimated correlation coefficients or highlighting the statistically significant estimates otherwise; in addition, it is highly advisable to perform additional tests for the presence of multicollinearity, besides the criterion suggested by Evans (1996) in lines 211-213, e.g. based on variance inflation factors (VIF). The correlation coefficient table for the model has 12 variables, so it is difficult to show more statistical significance due to the width of the table compared to the page. The author also shows the necessary tests to check the errors of the model. Currently, the article also shows the correlation coefficient table and autocorrelation test. In the model, there is a lag variable of the dependent variable, so multicollinearity is certain to occur. The estimation method used is S-GMM, so this error can be overcome. Therefore, the author does not show the results of the multicollinearity test.

Overall, the results of the study are hardly surprising and largely trivial as they demonstrate that, on the one hand, most of the activities conducted by commercial banks in Vietnam (lending, services, FX trading, investment securities trading, other operations) and economic growth exert positive impact on their profitability, while, on the other hand, loan provisions affect it negatively. The Author also finds short-term securities trading and investments in shares to have insignificant impact on profitability without, however, recognising the fact that these activities may actually serve different purposes – as the former may be more related to liquidity management, and the latter may be oriented towards long-term returns, which might not be visible in the quarter-by-quarter type of analysis. Moreover, the above general results represent the developments occurring on average in the entire examined sample and actually provide little value-added for the management of an individual bank, especially as the data on minimum values and dispersion of the bank-specific characteristics given in Table 2 (p. 6) demonstrates that the individual performance of the examined banks is very diversified and may sometimes exhibit exactly opposite effects to the ones predicted by the estimated model. I have argued strongly about the research context and the novelty of the topic. Therefore, I do not agree with the author's point of view.

To sum up, the paper does not offer a meaningful contribution to the field of study, and its overall research design seems to require a thorough re-elaboration. Unfortunately, the above shortcomings do not allow its current version to be considered for publication. I have argued strongly about the research context and the novelty of the topic. Therefore, I do not agree with the author's point of view.

Comments on the Quality of English Language: Although the language used in the paper is generally comprehensible, I would strongly recommend having the paper proofread by a native speaker to improve the style (see e.g. ‘trading securities activities’ instead of ‘securities trading activities’ in line 129; ‘collected from Author’ in line 173; ‘there is an endogenous phenomenon” in Table 4, p. 6), spelling (see e.g. ‘servisce’ in the formula for variable X3 in Table 1 on p. 4) and wording (see e.g. ‘earning’ instead of ‘earnings’ in the formula for variable X2 in Table 1 on p. 4). Moreover, in line 161, it should be ‘2018’ instead of ‘2028’.

The author edited at line 220.

The entire content of the previous article also used MDPI's editorial services.

Author Response File: Author Response.docx

Round 3

Reviewer 1 Report

Comments and Suggestions for Authors

I did not find responses to my comments in round 2. The version of the paper is the same revised paper in round 1. If this is aa error, please ensure to submit the correct files. I attach again my comments of the second report: 

1- The paper's absence of theoretical foundations is a serious concern. There is no empirical research without a basis that justifies the econometric modeling and the relationship between variables. For the determinants of bank performance, one can rely on the market power and efficiency structure. 

2- It does not make sense to test for heteroscedasticity in random and fixed effects models while the regression is a dynamic panel that is estimated by System-GMM. Those tests are needless. The author has to control for serial correlation and heteroscedasticity in residuals by clustering (for banks) the standard errors. This means a re-estimation of the model (this means obtaining other results and another interpretation).

3- The author did not precise what variables are considered endogenous, predetermined, and exogenous (asked in my previous report). I also recommend to classify the variables into internal/external, bank-specific, industry-specific, and macroeconomic.

4- Return on equity, and the net interest margin are quite measures of bank performance. The robustness analysis (missing again in the revision) is mandatory to validate the results. Otherwise, the author can do some sensitivity analysis!

5- The author confuses research gaps with the comparison of the results with previous literature. Research gaps reflect what is not done and then justify the contribution of the current study before knowing the results. Then, a comparison of the findings should be made in the discussion section. The comparison detects similarities and disparities. In the latter case, the author should provide reasons why his findings differ from existing studies.

6- Policy implications of the findings are also absent in the revised version. These should be added thoroughly in the discussion section.

Author Response

1- The paper's absence of theoretical foundations is a serious concern. There is no empirical research without a basis that justifies the econometric modeling and the relationship between variables. For the determinants of bank performance, one can rely on the market power and efficiency structure. The author added it in lines 147 – 155.

2- It does not make sense to test for heteroscedasticity in random and fixed effects models while the regression is a dynamic panel that is estimated by System-GMM. Those tests are needless. The author has to control for serial correlation and heteroscedasticity in residuals by clustering (for banks) the standard errors. This means a re-estimation of the model (this means obtaining other results and another interpretation). The author added it in lines 344 – 349.

3- The author did not precise what variables are considered endogenous, predetermined, and exogenous (asked in my previous report). I also recommend to classify the variables into internal/external, bank-specific, industry-specific, and macroeconomic. The author added it in lines 288 – 293; 276 – 285; and 301 – 307.

4- Return on equity, and the net interest margin are quite measures of bank performance. The robustness analysis (missing again in the revision) is mandatory to validate the results. Otherwise, the author can do some sensitivity analysis! The author added it at lines 316 – 322; 365 – 374 and Table 5.

5- The author confuses research gaps with the comparison of the results with previous literature. Research gaps reflect what is not done and then justify the contribution of the current study before knowing the results. Then, a comparison of the findings should be made in the discussion section. The comparison detects similarities and disparities. In the latter case, the author should provide reasons why his findings differ from existing studies. The author added it on lines 378 – 380; and 396 – 403.

6- Policy implications of the findings are also absent in the revised version. These should be added thoroughly in the discussion section. The author added it on lines 442 – 454; and 458 – 462.

Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

The resubmitted version of the manuscript is identical to the one uploaded after the first-round review.  In comparison to the original submission it incorporates some amendments regarding the formulation of the scope of the study and the interpretation of the obtained results. However, the following issues remain unresolved:

1. The paper still does not propose any research hypotheses regarding the determinants of profitability in the Vietnamese banking sector. The formulation of hypotheses is a crucial element of scientific investigation and a standard component of research papers. Hypotheses should mediate between the gap identified in the literature and the empirical approach proposed to address it.
2. The author refers to variables X₂–X₆ as “profit margins,” even though the numerators of the fractions used to calculate them include only income from the respective activities, without adjusting for costs. For a variable to represent an actual margin, the numerator should employ net income (i.e., income minus cost), as is done in the case of variable X₁. Otherwise, the variable reflects the share of income from a given activity in the bank’s total operating income rather than an actual margin.
3. Table 3 still does not present the statistical significance of the correlation coefficients between the model variables. Without this, the informativeness of the table remains limited. Moreover, contrary to the author's response in the first-round review, adding p-values below the estimates (e.g., in brackets, as is typically done) should not pose significant difficulties. Additionally, given that the author has chosen to present these correlations in the paper, including an additional test for the significance of multicollinearity between regressors would enhance the transparency of the research framework, regardless of the robust estimation technique used.

Overall, despite some improvements in research design in comparison to the original submission, the resubmitted version is exactly the same as the one uploaded after the first-round review. The study's scientific value-added remains marginal. The results are largely trivial and lack deeper interpretation, as indicated in the first-round review. Nonetheless, the study may appeal to readers interested in the specific context of the Vietnamese banking sector.

 

Comments on the Quality of English Language

The manuscript still requires thorough proofreading, particularly in the newly added passages, with attention to grammar (e.g., lines 122–125), punctuation (e.g., lines 96, 199, 210), spelling (e.g., “servisce” in the formula for variable X2 in Table 1), and style (e.g., lines 13–14).

Author Response

1. The paper still does not propose any research hypotheses regarding the determinants of profitability in the Vietnamese banking sector. The formulation of hypotheses is a crucial element of scientific investigation and a standard component of research papers. Hypotheses should mediate between the gap identified in the literature and the empirical approach proposed to address it. The author added it in lines 174 – 178; 181 – 185; 190 – 194; 198 – 202; 206 – 210; 214 – 218; 221 – 225; 233 – 237; 243 – 245; 250 – 252; and 263 – 267.
2. The author refers to variables X₂–X₆as “profit margins,” even though the numerators of the fractions used to calculate them include only income from the respective activities, without adjusting for costs. For a variable to represent an actual margin, the numerator should employ net income (i.e., income minus cost), as is done in the case of variable X₁. Otherwise, the variable reflects the share of income from a given activity in the bank’s total operating income rather than an actual margin. The author has explained this again in Table 1.
3. Table 3 still does not present the statistical significance of the correlation coefficients between the model variables. Without this, the informativeness of the table remains limited. Moreover, contrary to the author's response in the first-round review, adding p-values below the estimates (e.g., in brackets, as is typically done) should not pose significant difficulties. Additionally, given that the author has chosen to present these correlations in the paper, including an additional test for the significance of multicollinearity between regressors would enhance the transparency of the research framework, regardless of the robust estimation technique used. The author has added in Table 3.
4. Overall, despite some improvements in research design in comparison to the original submission, the resubmitted version is exactly the same as the one uploaded after the first-round review. The study's scientific value-added remains marginal. The results are largely trivial and lack deeper interpretation, as indicated in the first-round review. Nonetheless, the study may appeal to readers interested in the specific context of the Vietnamese banking sector. I expect a more positive review result from the reviewer after I complete round 2 editing.

 

Author Response File: Author Response.docx

Round 4

Reviewer 1 Report

Comments and Suggestions for Authors

I have read carefully the revised version. I detect many issues with regards econometric methodology and knowledge of the domain. Taking this paragraph, for example,  "At that time, the profit of commercial banks will converge to its average value in the long run, α also shows the speed of adjustment of commercial banks' profits to the equilibrium value, the closer this value is to 0, the faster the adjustment and the higher the level of competition in the commercial banking industry and vice versa (Athanasoglou et al., 2008).", the author is explaining the cointegration relationship. The author seems to confuse the focus on whether studying short and long-term dynamics by including further lagged dependent and independent variables or simply modeling the relationship between variables in a dynamic setting with the dependent variables being one-lagged. If the focus is long-run effects, then Panel ARDL, panel CS-ARDL or panel VECM should rather be estimated with a battery of tests carried on prior to estimation (such as slope heterogeneity, cross-sectional dependance, first and second generation tests of unit root tests, first or second generation cointegration tests). The final choice depends on the results of the tests...The author should be careful about econometric methodology according to the objective. If dynamic GMM is the focus by including only lagged dependent variable, then Table 4 should be removed because those tests are needless and incorrect (robust or cluster for banks should added as options to xtabond2 command to control for anomlies in standard errors). Furthermore, how the author treated the variables (endogenous, predetermined, exogenous) is again absent. I recommend reading lectures and tutorials in econometrics, including papers by Roodman (2009a, b). Furthermore, literature review should be divided into theoretical background and empirical evidence. Theories should be thoroughly explained and supported with relevant references  (not done in the revised version). The author has to read in deep in those theories.

GMM with instrumental variables does not show results for the lagged dependent variables. Why? The authors has used ivreg2 command while it is rather xtivreg2 to control for fixed (individual) effects related to banks. A test of individual effects should be supplemented. 

Overall, the paper should be thoroughly revised before submitting it to another journal. According to my humble view, it does not satisfy the publication criteria and there is much to to fulfill the requirements of a reliable scientific article. I recommend the following steps:

1- State clearly the objective of the study and what kind of relationship should be modeled between the variables.

2- Theories should be thoroughly developed and supported by references.

3- Fructify knowledge about econometric issues (models, tests, methodology, etc.). It requires a solid background. 

4- Robustness analysis should be be made either by changing the dependent variable or by doing sensitivity analysis (adding other regressors or removing some variables, insignificant ones, for example and redo estimation).

5- In the discussion of results, the author should precise whether findings support theories or not and provide explanations and arguments. 

Reviewer 3 Report

Comments and Suggestions for Authors

The Author has addressed all the issues and concerns raised in the previous rounds of the review process, significantly enhancing the overall logical consistency and scientific soundness of the paper. However, I suggest addressing the following issues in the current version:

• The reference to Nguyen et al. (2024) in lines 396–403 does not seem appropriate. In their study, Nguyen et al. (2024) examine, among other variables, the impact of the “capital ratio” (measured as the ratio of equity capital to total assets) on banks’ profitability. This is a completely different issue from the one captured by variable X7 in the paper under consideration.
• There is no need to include “a” and “b” after the year in references to Nguyen et al. and Nguyen (see lines 48, 266, 383, 407, 538, and 540).
• The phrase in Vietnamese in the last column of Table 4 (p. 10) should be translated into English.

Comments on the Quality of English Language

The English language used in the paper is comprehensible; however, additional proofreading would be beneficial, particularly regarding grammar (e.g., “impacts on the” instead of “impacts the” in lines 177 and 185; missing “has” in lines 194 and 201; redundant “it” in line 443), wording (e.g., “systematic” instead of “systemic” in lines 371–372), and style (e.g., “The period 2014–2018 saw many changes” instead of “The period (2018–2014) had many changes” in line 14; revising the sentence in lines 147–149 for clarity: “The Structure-Conduct-Performance (SCP) theory is applied to explain the monopoly power of commercial banks in concentrated markets, where low deposit mobilization costs at the input allow lending at higher interest rates.”).