MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING ĐỖ NGUYỄN HIỀN HOA FACTORS AFFECTING CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS IN VIETNAM GRADUATION THE[.]
MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING ĐỖ NGUYỄN HIỀN HOA FACTORS AFFECTING CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR: FINANCE – BANKING CODE: 7340201 HO CHI MINH CITY, 2022 MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING ĐỖ NGUYỄN HIỀN HOA FACTORS AFFECTING CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS MAJOR: FINANCE – BANKING CODE: 7340201 Instructor DR LÊ HÀ DIỄM CHI HO CHI MINH CITY, 2022 ABSTRACT “Factors affecting credit risk of joint stock commercial bank in Vietnam ” using data from 25 commercial banks on a panel data sample from 2010 to 2020 The independent variables are CAR (capital adequacy ratio), CAP (ratio of capital), ROA (ratio of profitability), SIZE (bank size), NPL (non-performing loan), GROW (credit growth), UPR (unemployment rate), GDP (GDP growth) and INF (inflation) are macro dependent variables on credit risk The goal of this study was to examine the impact of common factors o the credit risk of commercial banks in Vietnam The S - GMM regression model is used in this study to examine the factors affecting the credit risk of 25 commercial banks in Vietnam from 2010 to 2020 Keywords: Credit risk, Commercial Bank, Vietnam GUARANTEE My name is Do Nguyen Hien Hoa, and I am a student at the Banking University of Ho Chi Minh City, class HQ6 – GE11, student number: 050606180116 I hereby declare that the thesis topic "Factor affecting the credit risk of joint stock commercial banks in Vietnam" majoring in Finance - Banking, is my own research work that I directed Dr Le Ha Diem Chi's scientific advisor The data and research findings in this thesis are honest, with no previously published or made by others except for fully cited citations in the thesis HCM City, June, 2022 Author DO NGUYEN HIEN HOA ACKNOWLEDGEMENT First and foremost, I would like to thank my research supervisors, Dr Le Ha Diem Chi Without her assistance and dedicated involvement in every step throughout the process, this paper could have never been accomplished I am extremely grateful to you for supporting and understanding me during the past time I would also like to show gratitude to the teachers of Ho Chi Minh City University Of Banking - who have imparted valuable knowledge to me during the four years of the University Thank you for giving me the opportunity to meet and study at Ho Chi Minh City University of Banking Getting through my dissertation required more than academic support, and I have many, many teachers to thank for listening to and, at times, having to tolerate me over the past four years Finally, I would like to express my heartfelt appreciation to my family and friends, who have always helped, accompanied, and supported me over the years With limited knowledge and circumstances, this thesis cannot avoid many flaws As a result, I am looking forward to receiving teacher guidance so that I can improve my knowledge and serve my work in the future Sincerely thank everyone! HCM City, June, 2022 Author Do Nguyen Hien Hoa Contents ABSTRACT GUARANTEE THANK YOU Error! Bookmark not defined LIST OF ACRONYMS 10 LIST OF TABLES AND DIAGRAMS 11 CHAPTER 1: INTRODUCTION 12 1.1 REASONALE FOR RESEARCH 12 1.2 RESEARCH OBJECTIVES 12 1.2.1 Overall objectives 12 1.2.2 Detail objectives 12 1.3 RESEARCH QUESTIONS 13 1.4 OBJECTS AND RESEARCH SCOPE 13 1.4.1 Research object 13 1.4.2 Research scope 13 1.5 SCIENTIFIC AND PRACTICAL SIGNIFICANCE 13 1.5.1 Scientific significance 13 1.5.2 Practical significance 14 1.6 RESEARCH GAP 14 1.7 RESEARCH METHODS 14 1.8 CONTENT OF THESIS 15 CONCLUSION CHAPTER 17 CHAPTER 2: LITERATURE 18 2.1 OVERVIEW OF CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS 18 2.2 2.1.1 Definition of credit risk 18 2.1.2 The indicators reflect the credit risk of commercial banks: 19 FACTORS AFFECTING THE CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS 22 2.2.1 Macro factor 22 2.2.2 Bank specific 24 2.3 Overview of the studies to the thesis 26 2.3.1 Domestic studies 26 2.3.2 Forgein studies 27 CONCLUSION CHAPTER .31 CHAPTER 3: RESEARCH METHODS 32 3.1 DATA COLLECTION: 32 3.2 RESEARCH MODELS 33 3.3 DESCRIPTION VARIABLE AND RESEARCH HYPOTHESIS 34 3.3.1 Dependent variable 34 3.3.2 Independent variables 35 3.4 RESEARCH PROCESS 42 3.5 RESEARCH METHODS 44 3.5.1 Ordinary Least Squares (OLS) .44 3.5.2 Fixed Effect Model (FEM) 44 3.5.3 Random Effect Model (REM) 44 3.5.4 Feasible Generalized Least Square (FGLS) 44 3.5.5 System Generalized Model of Moments (S-GMM) 45 3.5.6 Check for suitable model selection 45 CONCLUSION CHAPTER .48 CHAPTER 4: RESEARCH RESULTS AND DISCUSSION 49 4.1 DESCRIPTIVE STATISTICAL 49 4.2 CORRELATION ANALYSIS 51 4.3 MULTICOLLINEARITY TEST .52 4.4 ESTIMATED THE POOLED OLS, FEM, REM MODELS 53 4.5 SELECTION TEST OF MODELS POOLED OLS AND FEM 55 4.6 ESTIMATED THE FGLS 56 4.7 ESTIMATING THE REGRESSION MODEL BY GMM 57 4.8 DISCUSSION 58 4.8.1 Bank size (SIZE) 60 4.8.2 Non-performing loan (NPL) 61 4.8.3 Ratio of Profitability (ROA) 62 4.8.4 Ratio of capital (CAP) 63 CONCLUSION OF CHAPTER 65 CONCLUSIONS AND RECOMMENDATIONS 66 5.1 CONCLUSION 66 5.2 RECOMENDATION 67 5.3 LIMITATIONS OF THE TOPIC AND RESEARCH DIRECTIONS 68 5.3.1 Limitations of the research 68 5.3.2 Further research directions 68 CONCLUSSION CHAPTER 69 REFERENCES 70 APPENDIX 73 LIST OF ACRONYMS Acronyms English CRI Credit risk CAR Capital adequacy ratio CAP Ratio of capital EP Earning Power ROA Ratio of Profitability SIZE Bank size COL Collateral NPL GROWTH Non – Performing loan Credit growth UPR Unemployment rate GDP GDP growth INF Inflation rate OLS Ordinary Least Squares FEM Fixed Effect Model REM Random Effect Model VIF Variance Inflation Factors FGLS Feasible Generalized Least Square GMM Generalized method of moments LIST OF TABLES AND FIGURES LIST OF TABLES Table List of Commercial banks in Vietnam 32 Table Summary of research on credit risk 39 Table Summary of Descriptive statistics 49 Table Correlation between Credit risk andindependent variables 51 Table Multicollinearity VIF 52 Table 4 Multicollinearity VIF 53 Table Estimated the FGLS 56 Table Estimated the GMM 57 Table Summary of research results 58 LIST OF FIGURES Figure Process study 42 Figure Relationship between CRI and SIZE 60 Figure Relationshipbetween CRI and NPL 61 Figure Relationshipbetween CRI and ROA 62 Figure 4 Relationshipbetween CRI and CAP 63 CHAPTER 1: INTRODUCTION 1.1 REASONALE FOR RESEARCH The banking system plays important role in the dynamic of economic activities since banks function as an entity that allocates capital from fund sufficient party to fund deficient party Banks function to allocate capital follows by inherent risk which is credit risk thus a bank should have a proper criteria and procedure in allocating fund Among other risks faced by banks, credit risk plays an important role on banks’ profitability since a large chunk of banks’ revenue accrues from loans from which interest is derived In addition, the banking system can make changes in the macroeconomic environment such as a decrease in growth, an increase in unemployment, interest rates and transport, which can affect credit risk Most for emerging economies need to focus on test risk signals credit risk needs to be studied more out some apartment solutions and limit risks in particular, contributing to reducing credit risk to an acceptable level Currently, researchers around the world are very interested in studying the risks in the operation of the banking system No exception with Vietnam, when credit is the main business of commercial banks, the study of credit risk becomes even more essentials Stemming from the above reasons, the author has chosen to carry out the research topic "Factors affecting the credit risk of joint stock commercial banks in Vietnam" to study