The factors affect to the non performing loans of commercial banks in vietnam

MINISTRY OF EDUCATION AND TRAINING HO CHI MINH UNIVERSITY OF BANKING ֎֎֎֎֎֎֎֎֎֎ GRADUATIONS THESIS THE FACTORS AFFECT TO THE NONPERFORMING LOANS OF COMMERCIAL BANKS IN VIETNAM Major: Banking and Financial Code: 34 02 01 NGUYEN HOANG KIM NGAN Ho Chi Minh City - 2023 MINISTRY OF EDUCATION AND TRAINING HO CHI MINH UNIVERSITY OF BANKING ֎֎֎֎֎֎֎֎֎֎ GRADUATIONS THESIS THE FACTORS AFFECT TO THE NONPERFORMING LOANS OF COMMERCIAL BANKS IN VIETNAM Major: Banking and Financial Code: 34 02 01 NGUYEN HOANG KIM NGAN 050607190289 HQ7 – GE04 SUPERVISOR: DR DU THI LAN QUYNH Ho Chi Minh City - 2023 i ABSTRACT The study examines the factors influencing problematic loans at 30 commercial banks in Vietnam between 2012 and 2021 The study's objectives are to: (1) identify factors influencing bad debt (2) By developing models based on past relevant studies' summarization, comparison, and statistical analysis (3) Finally, using the final research findings, provide policy implications for each element that influences non-performing loans The systematization of core theories and associated studies is the first step in the research The author proposes to build a research model based on the previously researched models that include the following factors: non-performing loans in the previous period (NPL1), credit risk provision ratio (LLR), bank leverage (LEV), return on total assets (ROA), GDP growth rate (GDP_GR), inflation (INF), and global economic policy uncertainty (WUI) The study applied quantitative approaches to statistically represent the findings of earlier studies that identified characteristics that significantly influenced defaulted loans Furthermore, the author calculates variables within the bank using data from commercial banks' yearly financial statements Macro variables are obtained from economic data from the General Statistics Office, state banks, and the Federal Reserve The study then employs descriptive statistics, variable correlation matrices, and regression using the OLS, FEM, REM, and SGMM methods The study's findings revealed that six factors out of eight were statistically significant Keywords: non-performing loans, the non-performing loans ratio, Join Stock Commercial Banks, Vietnam ii ACKNOWLEDGEMENT First of all, I would like to express my appreciation to my supervisor Ms Du Thi Lan Quynh for her sincere comments, her patient guidance, and useful critiques of this work Also, I would like to thank all the members of staff at the High-quality department of Banking University, HoChi Minh City Without their assistance, this thesis would not be completed In addition, I am very grateful to my family and friends for giving the biggest support and strength in difficult moments iii AUTHOR’S DECLARATION I hereby confirm that this dissertation entitled: ―The factors affect to the nonperforming loans of commercial banks in Vietnam‖, is my own study, and none of this work has been published before submission Regards, Nguyen Hoang Kim Ngan iv TABLE OF CONTENTS ABSTRACT i ACKNOWLEDGEMENT ii AUTHOR’S DECLARATION iii LIST OF ABBREVIATIONS viii LIST OF TABLES ix LIST OF FIGURES x CHAPTER INTRODUCTION 1.1 The urgency of the study: .1 1.2 Research objectives 1.2.1 General objectives: 1.2.2 Specific objectives: 1.3 Research Questions 1.4 Subject and scope of research 1.4.1 Subjects of study .4 1.4.2 Scope of research 1.5 Research methods and data 1.5.1 Research methodology .5 1.5.2 Research data 1.6 Meaning of the topic .6 1.7 Layout of the thesis CONCLUSION CHAPTER v CHAPTER 2: THEORETICAL FOUNDATIONS AND EMPIRICAL STUDIES 10 2.1 Theoretical basis of non-performing loans (NPLs) 10 2.1.1 The concept of non-performing loans (NPLs): 10 2.1.2 Non-performing loans classification: 12 2.1.3 Causes of non-performing loans (NPLs): .17 2.2 Determinants affect non-performing loans (NPLs) 18 2.2.1 Microelements inside the bank: 18 2.2.2 Macroeconomic factors of the economy: 21 2.3 Foundation theory 24 2.3.1 Asymmetric Information Theory: 25 2.3.2 Pecking Order Theory 25 2.3.3 Economy of Scale Theory 26 2.3.4 Keynesian Economics Theory .27 2.4 Empirical studies on NPLs 29 2.4.1 Overseas studies 29 2.4.2 Domestic studies .31 2.4.3 Synthesis of previous relevant studies 34 2.4.4 The research gap 37 CONCLUSION CHAPTER 39 CHAPTER RESEARCH MODELS AND METHODS 40 3.1 Research process 40 3.2 Research models .41 3.2.1 Proposed model framework: 41 vi 3.2.2 Research hypotheses: .45 3.3 Research method 49 3.3.1 Model estimation methods: .49 3.3.1.1 Correlation Matrix: .49 3.3.1.2 Analyze regression models to choose the suitable one .50 3.3.1.3 Inspection and remediation of defects of the selected model 51 3.3.2 Research data: 52 CONCLUSION CHAPTER 54 CHAPTER RESEARCH RESULTS 55 4.1 Statistics describe and consider correlations Linear multi-additive in the study sample 55 4.1.1 Descriptive statistics 55 4.1.2 Testing the correlation between variables in the study model 57 4.3 Multicollinearity inspection of the research model .58 4.4 Results of regression model estimation 59 4.4.1 OLS, FEM and REM synthetic regression model 59 4.5 Results of testing and selecting suitable models 61 4.6 Inspection of selected model defects .62 4.6.1 The result of testing the autocorellation 62 4.6.2 The result of testing the heteroscedasticity .63 4.8 Overcoming model defects using SGMM method 64 4.9 Discuss research results: 67 CONCLUSION CHAPTER 73 CHAPTER CONCLUSION AND RECOMMENDATIONS 74 vii 5.1 Conclusion 74 5.2 Solution proposal 74 5.2.1 The provision for credit risk: 74 5.2.2 Size .75 5.2.3 Return on assets (ROA) 75 5.2.4 GDP growth rate and World Uncertainty Index (GDP_GR and WUI) .75 5.3 Recommendations 75 REFERENCES 79 APENDIX 1: LIST OF COMMERCIAL BANKS USED IN MODEL .83 APPENDIX DATA OF COMMERCIAL BANKS 84 APENDIX RESULTS OF MODEL FROM STATA 13 95 APPENDIX THE METHOD TO SOLVE THE NPLs OF COUNTRIES AROUND THE WORLD .100 viii LIST OF ABBREVIATIONS Abbreviations DCC-GARCH Full meaning Dynamic Conditional Generalized Correlation Autoregressive Conditional Heteroskedasticity EAT Earning after tax EPU Economy policy uncertainty FEM Fixed effects model FRED The Federal Reserve economic data FSA Financial service authority GDP Gross domestic product GSO The General Statistics Office of Vietnam LEV Leverage LLR Loan loss reserve NPL Non-performing loans REM Random Effects model ROA Return on Assets ROE Return on Equity SBV State Bank of Vietnam SGMM System Generalized Method moments WB World Bank WHO World Health Organization WUI World Uncertainty Index of