MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING NGUYEN THI NHU YEN DETERMINANTS OF CREDIT RISK IN VIETNAMESE COMMERCIAL BANKS GRADUATE THESIS MAJOR FINANCE –[.]
MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING NGUYEN THI NHU YEN DETERMINANTS OF CREDIT RISK IN VIETNAMESE COMMERCIAL BANKS GRADUATE THESIS MAJOR: FINANCE – BANKING CODE: 34 02 01 HO CHI MINH CITY, 2023 MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING Author: NGUYEN THI NHU YEN Student code: 030135190760 Class: HQ7-GE06 DETERMINANTS OF CREDIT RISK IN VIETNAMESE COMMERCIAL BANKS GRADUATE THESIS MAJOR: FINANCE – BANKING CODE: 34 02 01 ADVISER DR LE HA DIEM CHI HO CHI MINH CITY, 2023 i ABSTRACT This research aims to find the determinants affecting the credit risk of commercial banks in Vietnam The credit risk of Vietnamese commercial banks is measured by a bunch of independent variables such as bank–specific variables including the non-performing loans (NPL), the size of the bank (Size), equity-toasset ratio (CAP), return on assets (ROA), return on equity (ROE), loans and bank profitability (PROF) The author also uses some research methods, namely Pooled OLS model, FEM model, REM model, and S-GMM method, which are based on the unbalanced panel data of 27 commercial banks in Vietnam from 2010 to 2022 The study also used the independent variables which are represented for the macroeconomic elements, namely economic growth rate (GDP), inflation rate (INF), and the unemployment rate (UNEMP) The research results show that almost all microeconomic elements significantly affected the credit risk of Vietnamese commercial banks Moreover, all the macroeconomic determinants used in the thesis had positive effects on the credit risk of commercial banks operating in the Vietnamese stock market Keywords: Credit risk, commercial banks, Vietnam, macroeconomic elements, microeconomic elements, bank-specific factors, panel data ii DECLARATION OF AUTHENTICITY As the author of this thesis, I declare that the following are: Full name: Nguyen Thi Nhu Yen Student class: HQ7 – GE06, Faculty of Finance and Banking, Ho Chi Minh University of Banking Student code: 030135190760 I declare that the study with the title "Determinants of credit risk in Vietnamese commercial banks" is completely made by myself based on inquiry and the guidance of my lecturer Dr Le Ha Diem Chi In addition, none of this research has been published before submission All the research data in the tables used for the analysis, evaluation, and comment are collected from many different sources indicated in the references section If any fraud is discovered, I take full responsibility for the content of my thesis Sincerely Ho Chi Minh City, 12th June, 2023 Author Nguyen Thi Nhu Yen iii ACKNOWLEDGEMENTS I would like to express my gratitude to all lecturers at Ho Chi Minh University of Banking for teaching and imparting valuable knowledge and experiences to me during my studying process It was the fundamental foundation and valuable luggage for me to enter the practice working environment in the near future In addition, I also would like to thank my lecturer, Dr Le Ha Diem Chi has devoted herself to teaching and giving comments to help me to complete my graduation thesis well Finally, I wish all lecturers at Ho Chi Minh University of Banking always have a lot of good health and success in their occupations iv CONTENTS ABSTRACT i DECLARATION OF AUTHENTICITY ii ACKNOWLEDGEMENTS iii CONTENTS iv LIST OF ABBREVIATIONS viii LIST OF TABLES x LIST OF GRAPHICS xi CHAPTER 1: INTRODUCTION 1.1 Reasons for choosing the study 1.2 Research objectives 1.2.1 General objectives 1.2.2 Specific objectives 1.3 Research questions 1.4 The research subject and scope of study 1.4.1 The research subject 1.4.2 Scope of the research .4 1.5 Research method 1.5.1 Research method .6 1.5.2 Research data .6 1.6 Contribution 1.7 Research structure v CONCLUSION OF CHAPTER CHAPTER 2: THEORETICAL FRAMEWORK AND REVIEW OF PREVIOUS EXPERIMENTAL STUDIES 10 2.1 Review of commercial banks 10 2.1.1 Commercial banks 10 2.1.2 Functions of commercial bank .10 2.2 Review of bank credit 12 2.2.1 Bank credit 12 2.2.2 Features of bank credit 13 2.2.3 The role of commercial bank credit 14 2.3 Review of credit risk 15 2.3.1 Credit risk 15 2.3.2 The impact of credit risk on commercial banks 16 2.3.3 Factors affecting credit risk of commercial banks 17 2.4 Review of the prior experience research 21 2.4.1 Review of domestic research paper 21 2.4.2 Review of foreign research paper .23 CONCLUSION OF CHAPTER 32 CHAPTER 3: RESEARCH METHODS 33 3.1 Research process 33 3.2 Sample and research data 34 3.2.1 The research sample 34 3.2.2 The research data 34 vi 3.3 Research method 35 3.3.1 Variance inflating factor - VIF .35 3.3.2 Analysis and selection of effective models .35 3.3.3 Feasible Generalized Least Square - FGLS 36 3.3.4 Testing and handling defects of the research model 37 3.4 Research model 38 3.4.1 Research model .38 3.4.2 Explaining the variables in the research model .39 3.4.3 Research hypotheses .41 CONCLUSION OF CHAPTER 48 CHAPTER 4: RESEARCH RESULTS 49 4.1 Descriptive statistical analysis 49 4.2 Check for multicollinearity 51 4.3 Correlation analysis 52 4.4 Table Regression Data Analysis (OLS/FEM/REM Model) 54 4.5 Selection of estimation method 55 4.6 Test for heteroscedasticity and autocorrelation 56 4.6.1 Test for heteroscedasticity .56 4.6.2 Test for autocorrelation 57 4.7 Overcoming the research model by FGLS 58 4.8 Test for endogenous variable and GMM regression model method 59 4.8.1 Test for endogenous variable 59 4.8.2 GMM Regression Model Method 60 vii 4.9 Summarize and discuss research results 62 4.9.1 Microeconomic variables .62 4.9.2 Macroeconomic variables 66 CONCLUSION OF CHAPTER 70 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 71 5.1 Conclusions about the study 71 5.2 Some suggested solutions 72 5.3 Limitations of the graduate thesis and direction for future research 74 5.3.1 Limitations of the research 74 5.3.2 Direction for future research 75 CONCLUSION OF CHAPTER 76 REFERENCES i APPENDIX .iv viii LIST OF ABBREVIATIONS Number Acronym Meaning CAP CR EVFTA FEM Fixed Effects Model FGLS Feasible Generalized Least Squares GDP Gross domestic product GMM Generalized method of moments INF Inflation rate NPL Non-performing loans 10 OLS Ordinary least squares 11 PROF Bank profitability 12 REM Random Effects Model 13 ROA Return on assets 14 ROE Return on equity 15 SBV State bank of Vietnam 16 S-GMM Equity-to-asset ratio Credit risk European-Vietnam Free Trade Agreement System generalized method of moments