VU THU HA FACTORS AFFECTING BANK PROFITABILITY THE CASE OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR FINANCE AND BANKING CODE 7340201 HO CHI MINH CITY, 2022 ( MINISTRY OF EDUCATION AND TRAIN[.]
MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING VU THU HA FACTORS AFFECTING BANK PROFITABILITY: THE CASE OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR: FINANCE AND BANKING CODE: 7340201 HO CHI MINH CITY, 2022 VU THU HA FACTORS AFFECTING BANK PROFITABILITY: THE CASE OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR: FINANCE AND BANKING CODE: 7340201 SCIENCE INSTRUCTOR Dr NGUYEN DUY LINH HO CHI MINH CITY, 2022 i ABSTRACT The thesis studies the factors affecting the profitability of Vietnamese commercial banks through data of 14 commercial banks obtained from audited financial statements and macro information from World Bank published in the period from 2008 to 2020 The study selects return on assets (ROA) and return on equity (ROE) as dependent variables Through the results of the multivariable regression model, the Random Effects Model (REM) was considered to be the most suitable However, the REM model has autocorrelation and heteroscedasticity To overcome these defects, the thesis implements regression model using the sum of Feasible Generalized Least Squares (FGLS) Research results show that inflation rate and bank size have a positive effect on bank profitability through both ROA and ROE models, whereas, deposits to total assets ratio, noninterest income to operating income ratio, liquidity creation have negative effects on both models Loan loss provisions to loans and leases ratio has a negative impact on bank returns through ROE model However, loans and leases to total assets ratio only has an inverse influence on ROA Capital positively affects Vietnamese commercial bank profitability through the ROA variable Macroeconomic indicator such as GDP has no impact on profitability of Vietnamese commercial banks through neither ROA nor ROE From the study results, the thesis demonstrates the limitations of this study and suggests future research directions Keywords: Bank profitability, Commercial bank, Financial factors DECLARATION I declare that the graduation thesis is the work of my own at the university The survey data are collected from reality Research results, information and data used in the thesis have clear origins, are and have never been published in any research I take full responsibility for the truthfulness of this research thesis The author Vu Thu Ha ACKNOWLEGEMENT First of all, I would like to express my deep gratitude to Dr Nguyen Duy Linh the supervisor who directly guides my thesis, who has always spent plenty of time and effort to guide, support and help me during the research process I would also like to express my sincere thanks to the teachers of the Banking University of Ho Chi Minh City, who devotedly imparted knowledge during my study at the school I am also very grateful to my family, friends and relatives who have always been by my side to encourage me throughout the process of completing the thesis Despite many efforts, but in this thesis, it is inevitable that there are shortcomings I hope that the teachers and those who are interested in the topic continue to have comments and suggestions to help improve the topic I sincerely thank you! CONTENTS ABSTRACT i DECLARATION ii ACKNOWLEGEMENT iii CONTENTS iv LIST OF ABBREVIATIONS viii LIST OF TABLES ix LIST OF FIGURES x CHAPTER 1: INTRODUCTION 1.1 INTRODUCTION 1.2 RESEARCH OBJECTIVE 1.3 RESEARCH QUESTION 1.4 RESEARCH SUBJECT AND SCOPE 1.5 RESEARCH METHODOLOGY 1.5.1 Regression method 1.5.2 Data collecting method 1.6 EXPECTED CONTRIBUTION 1.7 THE STRUCTURE OF RESEARCH CHAPTER 2: LITERATURE REVIEW 2.1 THEORETICAL BASIS OF BANK PROFITABILITY 2.2 FACTORS AFFECTING BANK PROFITABILITY 2.2.1 Bank-specific factors 2.2.1.1 Liquidity creation 2.2.1.2 Bank size 10 2.2.1.3 Capital 11 2.2.1.4 Loans and leases 12 2.2.1.5 Deposits 13 2.2.1.6 Noninterest income 13 2.2.1.7 Loan loss provisions 14 2.2.2 Macroeconomic factors 15 2.2.2.1 Gross Dometic Product (GDP) 15 2.2.2.2 Inflation 16 2.4 RESEARCH GAP 18 CHAPTER 3: METHODOLOGY 20 3.1 RESEARCH PROCESS 20 3.2 RESEARCH DATA 22 3.3 RESEARCH METHODOLOGY 24 3.3.1 Descriptive statistics 24 3.3.2 Correlation analysis 24 3.3.3 Regression analysis 25 3.4 RESEARCH MODEL 25 3.5 VARIABLE DEFINITION 26 3.5.1 Dependent variables 26 3.5.2 Independent variables 27 CHAPTER 4: RESULT 34 4.1 DESCRIPTIVE STATISTICS 34 4.2 CORRELATION ANALYSIS 37 4.3 MULTICOLLINEARITY TESTING 39 4.4 REGRESSION RESULT OF ROA 40 4.4.1 Regression analysis result summary 40 4.4.2 Choosing suitable regression model 42 4.4.2.1 Pooled OLS and REM regression 42 4.4.2.2 FEM and REM 42 4.4.3 Regression defect testing 43 4.4.3.1 Heteroscedasticity 43 4.4.3.2 Autocorrelation testing 44 4.5 REGRESSION RESULT OF ROE 46 4.5.1 Regression analysis of ROE result summary 46 4.5.2 Choosing suitable regression model 48 4.5.2.1 Pooled OLS and FEM 48 4.5.2.2 FEM and REM 48 4.5.3 Regression defect testing 49 4.5.3.1 Heteroscedasticity 49 4.5.3.2 Autocorrelation testing 50 4.5.4 Fixing regression model defect 50 4.6 RESEARCH DISSCUSION 51 CHAPTER 5: CONCLUSION AND RECOMMENDATION 58 5.1 CONCLUSION 58 5.2 RECOMMENDATION 59 5.2.1 Recommendation for liquidity creation 59 5.2.2 Recommendation for bank scale 60 5.2.3 Recommendation for deposit controlling 60 5.2.4 Recommendation for lending activity credit risk managing .61 5.2.5 Recommendation for capital strengthening 61 5.2.6 Recommendation for targets following inflation control 62 5.3 LIMITATION OF THE TOPIC AND FUTURE RESEARCH DIRECTION 63 5.3.1 Limitation 63 5.3.2 Future research direction 64 REFERENCES 65 APPENDIX 74 LIST OF ABBREVIATIONS Abbreviation Meaning GDP Gross Domestic Product FEM Fixed Effect Model REM Random Effect Model OLS Ordinary Least Square GLS Generalized Least Squares FGLS Feasible Generalized Least Squares ROA Return on Assets ROE Return on Equity .. .VU THU HA FACTORS AFFECTING BANK PROFITABILITY: THE CASE OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR: FINANCE AND BANKING CODE: 7340201 SCIENCE INSTRUCTOR Dr NGUYEN DUY LINH HO... commercial banks, the author chooses the topic "Factors affecting the bank profitability: The case of commercial banks in Vietnam? ?? The research results will clarify the impact of determinants on the financial... data of 14 Vietnamese commercial banks in the system, helping readers have a better overview of financial indicators influencing profitability of the system of commercial banks in Vietnam, thereby