MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING ********************* HOCHIMINH UN1VERSITY OF BANKING NGUYEN DANG KHANH HUYEN FACTORS AFFECTING CAPITAL A[.]
MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING ********************* HOCHIMINH UN1VERSITY OF BANKING NGUYEN DANG KHANH HUYEN FACTORS AFFECTING CAPITAL ADEQUACY RATIO OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS Major: Banking and Financial Code: 7340201 Ho Chi Minh City – 2023 MINISTRY OF EDUCATION AND TRAINING VIETNAM THE STATE BANK OF HO CHI MINH UNIVERSITY OF BANKING ********************* HOCHIMINH UNIVERSITY 0F BANKING NGUYEN DANG KHANH HUYEN STUDENT CODE: 050607190175 CLASS: HQ7 – GE07 FACTORS AFFECTING CAPITAL ADEQUACY RATIO OF COMMERCIAL BANKS IN VIETNAM GRADUATION THESIS Major: Banking and Financial Code: 7340201 SUPERVISOR: DR DU THI LAN QUYNH Ho Chi Minh City – 2023 ABSTRACT The topic “FACTORS AFFECTING CAPITAL ADEQUACY RATIO OF COMMERCIAL BANKS IN VIETNAM” is based on previous researches related to factors affecting the capital adequacy ratio of commercial banks The scope of the study is 20 commercial banks in Vietnam in the period 2012 – 2021 Furthermore, this research data is secondary data collected from audited consolidated financial statements of commercial banks and the World Bank The topic uses a univariate regression model with the dependent variable being the bank’s capital adequacy, and the independent variables being bank size (SIZE), deposits ratio (DEP), return on assets (ROA), loans (LOA), non-performing loans (NPL), and inflation rate (INF) Through the regression models Pooled-OLS, FEM, REM, FGLS along with some tests to find a complete model and have statistical significance The model estimation results show that SIZE and DEP negatively impact the bank's capital adequacy ratio Meanwhile, NPL shows a positive effect on banks’ capital adequacy ratio On the other hand, ROA, LOA, and INF are nonstatistically significant Based on this research results, the study provides suggestions and policy implications for bank administrators to manage the capital adequacy of Vietnamese commercial banks by at least 8% Keywords: Capital Adequacy Ratio, Basel, Commercial Banks, Vietnam DECLARATION OF AUTHENTICITY I hereby declare that this is my independent thesis The data used in the thesis are of clear origin and published following the law The research results in the thesis are my research and analysis, honestly, objectively, and by following the reality of Vietnam These results have not been published in any previous papers Ho Chi Minh City, April 2023 The Author Nguyen Dang Khanh Huyen ACKNOWLEDGEMENT Firstly, I would like to send my profound gratitude to all the lecturers at Banking University, in the Office of Academic Affairs, and especially to the Faculty of Finance and the Faculty of Banking lecturer while studying for a bachelor’s degree at the Ho Chi Minh University of Banking Secondly, I would like to express my sincerest and most profound thankfulness to Dr Du Thi Lan Quynh for her guidance and patience in giving me valuable recommendations during my study period I am happy and fortunate to carry out this study under her supervisor Lastly, I would like to thank my family for their support during my study and life Without encouragement and sacrifice, I would not have finished this thesis, so I express my special love and gratitude to them However, the study cannot avoid certain drawbacks due to the limitation of experience and time All the comments and advice which are contributed by the examiners are gratefully welcomed and appreciated Ho Chi Minh City, April 2023 The Author Nguyen Dang Khanh Huyen TABLE OF CONTENT ABSTRACT DECLARATION OF AUTHENTICITY ACKNOWLEDGEMENT TABLE OF CONTENT LIST OF ABBREVIATIONS LIST OF TABLES LIST OF GRAPHS 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 2.1 2.2 3.1 3.2 CHAPTER 1: INTRODUCTION Reason for choosing the topic .1 The research objectives .2 1.2.1 Overall objectives 1.2.2 Specific objectives .2 The research question Subject and scope of the research .3 Methodology Research content Contribution of the thesis The proposed layout of the thesis SUMMARY OF CHAPTER CHAPTER 2: THEORETICAL FRAMEWORK The capital adequacy ratio of commercial banks 2.1.1 The concept of the capital adequacy ratio .8 2.1.2 Meaning of the capital adequacy ratio 2.1.3 Measure the capital adequacy ratio 10 Empirical research overview .11 2.2.1 Foreign research 11 2.2.2 Domestic research 15 2.2.3 Research gap .18 SUMMARY OF CHAPTER 20 CHAPTER 3: RESEARCH METHODS 21 Analysis process .21 Samples and research data .22 3.2.1 Research samples 22 3.3 3.4 3.5 4.1 4.2 4.3 4.4 5.1 5.2 5.3 3.2.2 Research data 23 3.2.3 Research tools .23 Regression methods and tests 23 3.3.1 Ordinary least square method (OLS) 23 3.3.2 Fixed Effect Model (FEM) 24 3.3.3 Random Effect Model(REM) .24 Research model and hypothesis .24 3.4.1 Research model 24 3.4.2 Description of variables and hypothesis 25 Model selection test 29 3.5.1 Testing the appropriateness between the Pooled OLS and FEM 29 3.5.2 Testing the appropriateness between the FEM and REM 29 SUMMARY OF CHAPTER 30 CHAPTER 4: RESEARCH RESULTS 31 Descriptive statistics 31 Research results 33 4.2.1 Correlation analysis 33 4.2.2 Multicollinearity test 34 Regression results of the research model 34 4.3.1 Regression models results 34 4.3.2 Defect tests 37 4.3.3 Final model 38 Summary 40 4.4.1 Bank size (SIZE) .40 4.4.2 The loans ratio (LOA) .41 4.4.3 Returns on assets (ROA) 41 4.4.4 Non-performing loans ratio (NPL) .41 4.4.5 The deposits ratio (DEP) 42 4.4.6 Inflation rate (INF) 42 SUMMARY OF CHAPTER 44 CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS 45 Conclusion 45 Policy Implications 45 Limitation of the thesis 46 5.4 Proposing directions for further research 47 SUMMARY OF CHAPTER 48 REFERENCES APPENDIX 1: LIST OF COMMERCIAL BANKS IN VIETNAM IN THE RESEARCH SAMPLE APPENDIX 2: CALCULATED DATASET APPENDIX 3: REGRESSION RESULTS WITH STATA 16.0 LIST OF ABBREVIATIONS CAR Capital adequacy ratio DEP Deposits ratio FEM Fixed effect model FGLS Feasible Generalized Least Square INF Inflation rate LOA Loans ratio NPL Non-performing loan OLS Ordinary Least Squares REM Random effect model ROA Return on assets RWA Risk-weighted assets SBV State Bank of Vietnam SIZE Bank size VIF Variance inflation factors LIST OF TABLES Table 2.1 Summary of research results 17 Table 3.1 Summary of expected hypothesis 28 Table 4.1 Variables Statistics 31 Table 4.2 Correlation matrix 33 Table 4.3 Multicollinearity test 34 Table 4.4 Regression results of models 35 Table 4.5 F-test Test 36 Table 4.6 Hausman Test 36 Table 4.7 Modified Wald Test 37 Table 4.8 Wooldridge Test 38 Table 4.9 Regression results of FGLS 38 Table 4.10 Summary of expected hypothesis and experimental results 40