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MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY ********************* PHAM QUANG HUY THE IMPACT OF CREDIT GROWTH ON PROFITABILITY OF VIETNAMESE COMM[.]
MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY ********************* PHAM QUANG HUY THE IMPACT OF CREDIT GROWTH ON PROFITABILITY OF VIETNAMESE COMMERCIAL BANKS GRADUATE THESIS MAJOR: BANKING AND FINANCE CODE: 7340201 HO CHI MINH CITY, 2022 MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY ********************* PHAM QUANG HUY THE IMPACT OF CREDIT GROWTH ON PROFITABILITY OF VIETNAMESE COMMERCIAL BANKS GRADUATE THESIS MAJOR: BANKING AND FINANCE CODE: 7340201 SUPERVISOR Assoc Prof Dr DANG VAN DAN HO CHI MINH CITY, 2022 i EXECUTIVE SUMMARY The thesis studies the impact of credit growth on profit of Commercial banks in Vietnam Data is collected on 17 banks in the period from 2011 to 2020 using panel data analysis methods such as OLS regression, fixed effects model (FEM) and random effects model (REM) I have drawn some important conclusions Firstly, credit growth has a statistically significant positive relationship with current year profits measured by the ROA of banks Second, when considering lagging into the model, the author finds that a lag of up to years in credit growth is still positively correlated with bank profit Third, a lag of up to years of reverse credit growth is correlated with bank profit but is not statistically significant From the analysis of the results from the random-effects model, the author draws some important conclusions and from that makes suggestions and recommendations for the operation of commercial banks in Vietnam ii DECLARATION I hereby declare that this is my research work, and the research results presented in the thesis are honest and objective The sources of information cited in this thesis are clearly indicated I am responsible for my thesis Signature Pham Quang Huy iii ACKNOWLEDGEMENT First of all, I am grateful and would like to send my sincerest and special thanks to my supervisor, Assoc Prof Dr Dang Van Dan for helping me to finish this challenging thesis Despite my defects throughout the process of performing the thesis, he always showed his carings and enthusiasm to support me to overcome Without Mr Dang Van Dan conscientious guidance and support, this thesis cannot be successfully accomplished Next, I would like to express my deepest gratitude to the teachers who are teaching at the Banking University of Ho Chi Minh City, who have spread the fire, passion and knowledge about economics from the most basic subjects, helping me to have a background in finance - banking Finally, I would like to thank to my family, friends, and colleagues who have always encouraged and helped me in the process of studying and researching the topic Although I have tried a lot, the thesis is not free of shortcomings I hope to receive the sympathy, guidance, help, and support of my colleagues iv TABLE OF CONTENTS EXECUTIVE SUMMARY i DECLARATION ii ACKNOWLEDGEMENT iii TABLE OF CONTENTS iv LIST OF INITIALISMS vi LIST OF TABLES vii LIST OF FIGURES viii CHAPTER INTRODUCTION .1 1.1 The urgency of the thesis 1.2 Research objectives and questions 1.3 Object and scope of the research 1.4 Methodology 1.5 Contribution of the thesis 1.6 Structure of the thesis .5 CONCLUSION CHAPTER CHAPTER LITERATURE REVIEW 2.1 Credit growth of commercial banks 2.1.1 Bank credit 2.1.1.1 Conception 2.1.1.2 Characteristic 2.1.1.3 Classify .11 2.1.1.4 Role 13 2.1.2 Credit growth of commercial banks 15 2.2 Profits of commercial banks 17 2.2.1 Concept 17 2.2.2 Role 18 2.2.3 Measurement criteria .18 2.3 Theoretical framework for the impact of credit growth on profitability of commercial banks 20 2.4 Empirical study on the impact of credit growth on profitability of commercial banks 21 CONCLUSION CHAPTER 25 v CHAPTER RESEARCH METHODS .26 3.1 Research process 26 3.2 Variables measurement 27 3.2.1 Research model design 27 3.2.2 A measure of a bank's profit 28 3.2.3 Variables measuring bank credit growth .28 3.2.4 Control variables .29 3.3 Data sources and research samples 30 3.4 Data regression methods 31 3.4.1 Introduction to panel data 31 3.4.2 Some estimation models in panel data regression 32 3.4.2.1 Pooled least-squares model (Pooled OLS) .32 3.4.2.2 Fixed Effects Model – FEM 33 3.4.2.3 Random Effects Model – REM 33 3.4.3 Selecting a regression model 34 3.4.4 Check the fit of the regression model 35 CONCLUSION CHAPTER 36 CHAPTER RESEARCH RESULTS 37 4.1 Descriptive statistics .37 4.2 Correlations matrix analysis 40 4.3 Estimation of regression model and model selection .42 4.4 Check the model's defects 48 4.5 Discuss regression results .51 CONCLUSION CHAPTER 53 CHAPTER CONCLUSIONS, RECOMMENDATIONS AND DISCUSSION 54 5.1 Conclusions 54 5.2 Recommendations 55 5.3 Limitations of the thesis 60 CONCLUSION CHAPTER 61 CONCLUSION 62 REFERENCES APPENDIX vi LIST OF INITIALISMS INITIALISM MEANING SBV State Bank of Vietnam OLS Ordinary Least Square FEM Fixed effects model REM Random - effects model LM - test Breusch and pagan Lagrangian Multiplier test VIF Variance Inflation Factor ROA Return On Equity GLS Feasible Generalized Least Squares vii LIST OF TABLES Table 4.1 Descriptive statistics of variables 37 Table 4.2 The correlation coefficient between the independent variables 41 Table 4.3 Variance inflation factor – VIF 42 Table 4.4 Regression results according to Pooled OLS, FEM and REM models 43 Table 4.5 F -test .44 Table 4.6 Hausman test .46 Table 4.7 Breusch & Pagan Lagrangian test .47 Table 4.8 Results after testing the model 48 Table 4.9 Wooldridge test 48 Table 4.10 LM – Breusch and pagan Lagrangian Multiplier Test (REM) .49 Table 4.11 Regression results according to REM model by GLS method .50 viii LIST OF FIGURES Figure 4.1 ROA average of Vietnamese commercial banks in the period 2011- 2020 38 Figure 4.2 Average credit growth of Vietnamese commercial banks in the period 2011 – 2020 .39 ... impact of credit growth on profitability of Vietnamese commercial banks" Overall objectives The overall objective of the thesis is to identify and explain the impact of credit growth on profitability... evaluates the credit growth and profitability of Vietnamese commercial banks in the period 2011 - 2020 From that, examines the impact of credit growth on profitability of Vietnamese Commercial banks. .. econometric models to test the impact and the meaning level of this impact The assessment and explanation of the impact of credit growth on profitability of Vietnamese commercial banks based on