Background of the research
Commercial banks play a crucial role in the growth of global economies, particularly in emerging markets, by fulfilling three key functions: payment systems, financial intermediation, and financial services These institutions collect deposits from individuals and businesses with idle funds and lend them to those in need, effectively allocating financial resources based on economic demand This rational allocation not only reduces costs but also maximizes benefits for both borrowers and lenders By acting as a bridge between various economic participants, banks generate capital and significantly contribute to national economic growth.
The banking sector plays a crucial role in the financial industry, significantly influencing the economy through both positive and negative impacts Commercial banks primarily focus on credit extension, using loans to generate profits while meeting their clients' capital needs (Lotto, 2018; Fungacova et al., 2014) By providing essential financial services, banks create opportunities for growth across various sectors of the global economy However, these benefits can only be realized if banks operate efficiently and are well-managed (Lotto, 2018; Fungacova et al., 2014).
(2014) pointed out in their research about the primary important factors for the growth
A stable market is characterized by a robust banking industry, where banks achieve significant profitability through their borrowing and lending activities A healthy financial environment fosters gradual growth in the flow of funds from savers to borrowers, ultimately leading to enhanced services for consumers.
The profitability of banks is crucial in the financial industry, as optimizing revenue is a primary goal for all institutions, including banks (Dao & Nguyen, 2020; Adeusi et al., 2014) Profits reflect the efficiency and effectiveness of an organization's internal processes and business operations Therefore, to achieve higher income, it is essential to understand the key determinants of profitability in commercial banks.
To ensure the profitability of banks and maintain the resilience of the financial system against potential economic impacts, it is essential to implement effective banking policies and regulations to mitigate risks (Dao & Nguyen, 2020) The significance of banking regulations has garnered substantial theoretical and empirical attention, particularly regarding the Basel Accord, which provides a framework for global banking procedures and management (Peterson, 2015; Luong et al., 2021) Additionally, bank capital is vital in influencing both the profits and risks that banks encounter (Nguyen, 2020; Batten).
Banks are mandated by regulatory authorities to maintain a minimum capital reserve to cushion against potential losses and risks that could impact the economy This requirement, grounded in the capital adequacy principle, serves as a crucial mechanism for ensuring the financial safety and stability of banks.
This research investigates the impact of bank regulations, specifically the Capital Adequacy Ratio (CAR), on the financial health of the banking system and the broader economic market By analyzing the relationship between CAR and financial stability, the study aims to provide insights into the effectiveness of Basel II regulations.
3 determinants of banks’ profitability, including CAR in the model to present for regulations element impact on banks’ profitability
In recent years, Vietnam has emerged as a significant player in the global economy, actively engaging with the international community and integrating into the worldwide financial ecosystem.
In 2020, Vietnamese commercial banks and the broader economy became increasingly sensitive and fragile due to heightened uncertainty and competition from other nations Despite this, the banking system in Vietnam has not fully adhered to the Basel Committee's global guidelines, with only a few commercial banks implementing Basel II, lagging behind other economies (Nguyen, 2020; Dang, 2019).
In the context of implementing Capital Adequacy Ratio (CAR) as part of the Basel II framework in Vietnam, only a limited number of banks have been approved to comply with all three regulatory pillars This variation in regulatory adherence may lead to differences in profitability among banks However, research on the impact of CAR on bank profitability remains scarce and underexplored in Vietnam, resulting in limited literature on the subject Given these gaps and the significant role of Vietnam's economy in the global market, this paper aims to examine the effects of CAR on banks' profitability, incorporating both bank-specific and macroeconomic indicators.
Objectives of the thesis
Firstly, learn about the current situation of banking regulations in Vietnam and the loading process of Basel application in management in the banking system
Secondly, identify impact factors of banks’ profitability in Vietnamese commercial banks, especially the effect of capital regulation (CAR), thereby assessing the influence level of those elements
To enhance bank revenues and optimize operational efficiency, it is essential to implement effective internal management solutions Additionally, regulatory authorities should consider amending regulations to better control capital adequacy ratios, thereby mitigating risks associated with banking operations.
Research object and scope
Study on factors that have an impact on banks’ profitability in Vietnam commercial banks
In terms of space: 21 Vietnam commercial banks
In terms of time: The research is conducted by using annual data from 2006 to
Research methodology
All supportive documents and information stated in the thesis are gathered from trusted online sources and quoted in reference
Collect and process cleaned data in statistical software (Stata)
● Methods of summary and analysis
Tables and graphics are employed in this thesis to present data and summarize the results from quantitative analysis after processing the data.
Thesis structure
The thesis is organized as follows:
Chapter 1: Literature review and theoretical basis
Chapter 2: Research data and methodology
Thesis contribution
This article examines the factors influencing banks' profitability, with a primary focus on Capital Adequacy Ratio (CAR) The analysis reveals the impact of CAR and Basel regulations on the profitability of commercial banks in Vietnam Based on these findings, the thesis provides management recommendations for banks and suggests policy adjustments for government and regulators to enhance the operational efficiency of commercial banks and strengthen the country's economic landscape.
This study addresses a long-overlooked issue that has not received adequate attention over an extended period The paper aims to explore this topic more comprehensively and compare the findings with previous research to provide new insights.
Literature review and research gap
The review of previous studies
Banks provide consumers, businesses, and governments with liquid, low-risk savings and credit options while developing diverse payment methods, such as demand deposits In a competitive landscape, it is crucial for banks to perform effectively to attract capital and persuade depositors to invest By enhancing organizational efficiency, banks can increase profitability, leading to stronger and more resilient financial institutions A healthy banking sector is vital for the stability of the financial system and can drive economic growth Additionally, there is a proven positive correlation between bank profitability and the efficiency of financial systems, as improved financial operations enhance banks' profitability by increasing the volume and quality of funds available to borrowers.
The banking system plays a crucial role in the economy by providing essential services and products that facilitate financial market circulation Consequently, it is vital for banks to have protective measures in place to shield against potential losses from regular operations Capital serves as a buffer to offset these losses and supports the banking system through its insurance function (Olalekan & Adeyinka, 2013) Each bank has the autonomy to establish its reserve levels to safeguard against risks, and maintaining adequate capital acts as a "confidence booster," signaling financial stability to investors and customers alike.
7 financial health to the public In the meantime, from the contrasting aspects, besides protecting banks’ organization, adequate capital can have impacts on the banking industry’s profitability
Understanding the impact of capital adequacy on bank profitability is essential for internal management, external investment, and macroeconomic governance Extensive research has explored this topic, and the following sections will provide insights into previous studies and their contributions to our understanding of how capital adequacy affects banks' profitability.
There is a massive number of papers investigating the impacts of capital requirements on banks’ profitability worldwide
Short (1979) and Bourke (1989) were pioneering studies on the determinants of bank profitability, laying the groundwork for assessing banks' profit potential Short's research revealed that larger banks, which often have lower operational costs, tend to be more profitable, highlighting the relationship between bank size and capital requirements In contrast, Bourke's analysis concluded that banks with higher capital ratios achieve greater profitability compared to those with lower ratios, supported by significant data from 12 banks across Europe, Australia, and North America, demonstrating the positive impact of Capital Adequacy Ratio (CAR) on bank profitability.
A significant study by Molynexu and Thornton (1992) highlighted the positive impact of capital ratio on bank performance across eighteen countries from 1986 to 1989 Expanding on this, Dmirguc-Kunt and Huizingz (1999) investigated the determinants of banking performance and confirmed the influence of capital ratio, while also revealing that foreign banks play a crucial role in this dynamic.
8 can obtain higher profits than domestic banks in developing countries, but in developed countries, the situation occurs in the opposite way
Recent studies in Nigeria highlight the negative impact of low bank capitalization, which fosters unethical practices within the banking sector This inadequate capital not only increases financial distress costs but also diminishes the profitability of local banks, ultimately hindering the development of the domestic market (Olalekan & Adeyinka, 2013).
A study by Olalekan & Adeyinka (2013) investigates the impact of capital adequacy on the profitability of Nigerian banks, utilizing data from questionnaires and financial statements from 2006 to 2010 Profitability is measured through return on assets (ROA), return on equity (ROE), and net interest margins (NIM) While the initial data analysis reveals an insignificant relationship, the subsequent analysis indicates a significant positive correlation between capital adequacy and profitability This research underscores the crucial role of capital adequacy in enhancing profitability for deposit-taking banks, while also highlighting that profitability serves as a key factor influencing bank risk management and loss protection.
Agbeja et al (2015) conducted a study on five Nigerian commercial banks over a five-year period to explore the relationship between capital adequacy ratio and bank profitability Unlike traditional measures such as ROA, ROE, or NIM, profitability was assessed using average profit after tax The findings revealed a significant positive correlation between capital adequacy ratio and profitability, leading the authors to recommend that banks increase their equity holdings to enhance profitability They also emphasized the importance of optimizing capital requirements for better financial performance.
9 level by review constantly and that Nigeria banks should be capitalized to access capital resources with the lower expense and improve working efficiency
In a 2015 study by Peterson K Ozili, the determinants of bank profitability were examined in the context of Basel capital regulation across six Nigerian commercial banks over an eight-year period from 2006 to 2013 The research utilized Return on Assets (ROA) and Net Interest Margin (NIM) as measures of profitability, revealing a positive and significant relationship between the bank capital adequacy ratio and profitability However, the study also indicated that the Basel capital regime had no substantial impact on bank profitability in Nigeria, suggesting that modifications to the Basel accord may be necessary to better address the goal of reducing bank risk-taking.
A study conducted in Nigeria by Ogboi & Unuafe (2013) analyzes the influence of capital adequacy and credit risk management on the financial performance of six banks between 2005 and 2009 The research aims to assess the impact of credit risk on commercial bank performance while highlighting the significance of capital adequacy indicators in enhancing banks' profitability Furthermore, the authors suggest that capital serves as a crucial buffer against potential deficits in depositors' funds.
Numerous studies have been conducted globally to examine similar objectives as research in Nigeria Notably, Goddard et al (2004) analyzed the profitability of European commercial banks during the 1990s, employing pooled cross-sectional time-series and dynamic panel models that considered factors such as size, diversification, risk, and ownership type Their findings indicate a positive relationship between the capital-assets ratio and bank earnings, suggesting that a high capital adequacy ratio may prevent banks from fully utilizing their funds, thereby reducing potential earnings value.
Căpraru & Ihnatov (2014) examined the factors influencing bank profitability in Eastern European countries, using key ratios such as ROE, ROA, and NIM Their study included capital adequacy, measured by the ratio of equity to total assets, and found it significantly impacts profitability ratios, albeit with a weaker effect on ROA Notably, the research introduced a dummy variable to account for the financial crisis period from 2008 to 2011, providing a framework for future studies to explore banking performance during uncertain times.
Athanasoglou et al (2008) studied how bank-level indicators impact bank profitability in Greek, by using unbalanced panel data for a longer period of 1985 –
In 2001, researchers employed least-squares methods on fixed and random effect models, selecting the most appropriate model based on Hausman test results They also utilized the GMM estimator to address endogeneity in the variables This study emphasizes the capital variable, measured by the ratio of equity to total assets, as a crucial factor in explaining bank profitability and enhancing banks' ability to manage credit risk, which negatively impacts their profitability.
Hassan and Abdel (2008) conducted research on the performance of banks in Islam, analyzing bank characteristics and financial environment indicators from 1994 to 2001 Their study utilized a combination of internal and external ratios to assess profitability and efficiency The findings reaffirm previous research regarding the relationship between capital requirements and bank profitability.
Naceur (2003)’s findings in the research of Tunisian Banking Industry indicate that:
Banks with a high net interest margin and profitability typically maintain a significant amount of capital A study by Naceur and Kandil in 2007 highlighted the impact of capital requirements on bank performance in Egypt, demonstrating that adequate capital levels are crucial for enhancing a bank's operational effectiveness.
Research gap
The examination of the influence of capital requirements on banks' profitability in Vietnam is limited, with few documents addressing this critical issue Capital Adequacy Ratio (CAR), defined by the Bank for International Settlements (BIS), represents the necessary capital banks must hold to mitigate potential losses In Vietnam, CAR regulations have evolved through various decisions and circulars, starting with Decision No 297/1999/QĐ-NHNN and including amendments like Decision 493/2005/QD-NHNN and Circular 41/2016/TT-NHNN These changes have led to fluctuations in risk management and profitability for commercial banks Given the potential relationship between capital adequacy and bank profitability, further investigation into this association is essential While research on profitability determinants exists, studies specifically addressing the impact of CAR are scarce Notably, Ngan et al (2021) represents the latest work, covering the period of CAR changes in Vietnam from 2005 onwards.
2021, with the participation of 26 commercial banks Therefore, inheriting from that
This paper aims to comprehensively analyze the impacts of capital requirements on bank profitability from 2006 to 2021, taking into account various crises and regulatory changes in Capital Adequacy Ratios (CAR) during this period.
This paper aims to provide a comprehensive list of variables that may influence banks' profitability Extensive research has established a significant relationship between ownership status and the profitability of both domestic and international banks.
Research on the relationship between ownership status and bank profitability has yielded mixed results Short (1979) found minimal evidence supporting a connection, while subsequent studies by Bourke (1989) and Molyneux & Thornton (1992) deemed the association invalid Athanasoglou et al (2008) also concluded that ownership did not significantly impact the profitability of Greek banks from 1985 to 2001 In contrast, Demirguc-Kunt and Huizinga (1999) highlighted a notable influence of state ownership on bank profitability, particularly among foreign banks in developed nations Furthermore, Micco et al (2007) observed that state-owned banks in developing countries generally exhibit lower profitability, reduced margins, and elevated overhead costs compared to their private counterparts, suggesting that the relationship may be less clear in industrialized countries.
Research in Vietnam, including studies by Phan et al (2020) and Nguyen et al (2018), indicates a positive correlation between state ownership and profitability Additionally, Ngan et al (2021) found a significant impact of Capital Adequacy Ratio (CAR) on small banks that are not government-owned This suggests that increasing the size of these banks and reducing government interference can enhance the effect of CAR on Return on Assets (ROA) The authors noted that for small banks free from Central Bank regulations and shareholder pressures, a higher CAR can drive improvements in profitability.
19 banks’ credit and portfolio better than banks with larger size and are regulated by the Central Banks more
Previous studies reveal a lack of coherence regarding the impact of ownership status on banks' earnings In Vietnam, four state-owned banks significantly contribute to total assets and profits, suggesting they receive more attention, incentives, and advantages from the Central Bank, enhancing their competitiveness against private banks However, these banks also face stricter regulations due to government intervention, leading to a dual impact on their operating efficiency This paper employs ownership as a dummy variable to clarify the ongoing debate about the relationship between ownership and profitability in Vietnam.
This research includes a dummy variable representing Basel compliance in banks, specifically focusing on the Capital Adequacy Ratio (CAR) Circular 41/2016/TT-NHNN mandates that Vietnamese commercial banks maintain a CAR of 8% to comply with Basel II, with a target implementation date of January 1, 2021, set by the Central Bank However, the COVID-19 pandemic significantly hindered this timeline, making it increasingly difficult to meet the original deadline Consequently, the Government issued Circular 22/2019/TT-NHNN, extending the compliance deadline to 2023 and allowing banks that have not yet achieved the required CAR to adjust their minimum target to 9% As a result, Basel compliance among Vietnamese banks remains inconsistent as of this year, with ongoing challenges anticipated.
20 to cause the impacts of CAR on bank profitability to shift among compliant and noncompliant Basel II banks
This research spans from 2006 to 2021, encompassing two significant periods of uncertainty: the Global Financial Crisis (GFC) and the Covid-19 pandemic The GFC, also known as the Great Recession, occurred from December 2007 to June 2009, resulting in profound effects on economic markets, politics, and society Vietnamese banks were inevitably influenced by the widespread repercussions of the GFC Similarly, the Covid-19 pandemic has emerged as a global health crisis, affecting businesses worldwide Recognizing the distinct impacts of these two events on the Vietnamese finance market, the author utilizes them as dummy variables to represent their influence in the research.
Incorporating the three dummy variables—state ownership, Basel compliance, and uncertain period—into this research enhances the existing literature by providing a more comprehensive analysis Unlike many studies in Vietnam that overlook the integration of these factors, this paper aims to fill that gap By examining these variables, it seeks to deliver valuable insights and practical recommendations for policymakers and governance authorities.
Thirdly, this paper optimizes the method of analyzing CAR impacts on bank earnings possibility by employing FEM, REM, and GMM as the methodology used in Nguyen
In Vietnam, research on the impact of CAR ratios has been limited, with Nguyen (2020) being a notable exception Most studies have traditionally utilized Fixed Effects Model (FEM) and Random Effects Model (REM) for regression analysis However, there is a growing need to adopt contemporary analytical models that account for endogeneity and autocorrelation to enhance the robustness of findings.
In his 2020 study, Nguyen incorporated Generalized Method of Moments (GMM) into the existing regression framework, which included Fixed Effects Model (FEM) and Random Effects Model (REM) The author expanded on this by considering a broader set of indicators, including Return on Equity (ROE), Return on Assets (ROA), and Net Interest Margin (NIM), to enhance the analysis beyond the scope of his previous work.
Research method and process
Research process
Study the literature on the impact of CAR on banks’ profitability in foreign countries and in Viet Nam
Choosing suitable models which can investigate the topic statistically
Basing on the purpose of the study and the literature review, conduct possible results for the impact of CAR and other determinants on banks’ profitability
Collect necessary data from banks and the Government to input valid data into Stata software
Empirical test results for the Whole Sample for ROA, ROE and NIM, showing the regression results from FEM, REM and GMM
Extended regression results for dummy variables in GMM model
Consult the teacher and read empirical studies to determine the topic
The author provides an overview of the current state of the Vietnamese banking system, analyzing existing literature with empirical findings After discussions with the instructor, the chosen research topic is: “The Impacts of Capital Requirements on Banks’ Profitability: Evidence from Vietnamese Commercial Banks.”
After deciding on the main research topic, the author reviews relevant literature on the impact of CAR (Capital Adequacy Ratio) on bank profitability both internationally and in Vietnam This process involves collecting concepts and empirical findings from previous studies to identify existing research gaps and guide the investigation toward addressing these deficiencies.
This is chosen by inheriting empirical tests in earlier documents, suitable for the research subjects and is able to fix the issues inside models and variables
In this study, the author identifies key variables believed to influence banks' profitability, categorizing them as independent and dependent variables Additionally, the author outlines the anticipated relationship between Capital Adequacy Ratio (CAR) and banks' profitability, indicating a specific expectation regarding the direction of this association.
The research utilizes data sourced from reputable online databases, with bank-level information obtained from S&P CapitalIQ, which compiles financial statements into an easily accessible format Additionally, macro-level data is sourced from the World Bank database, ensuring a comprehensive analysis.
To analyze the impact of Capital Adequacy Ratio (CAR) on the profitability of Vietnamese commercial banks, the author utilizes Stata software version 16.0 Initially, a descriptive analysis is conducted to elucidate the characteristics of the input sample.
The author conducts an empirical analysis of the entire sample using three selected models: Random Effects Model (REM), Fixed Effects Model (FEM), and Non-Linear Model (NIM) to assess banks' profitability through Return on Equity (ROE), Return on Assets (ROA), and Net Interest Margin (NIM) The study validates the chosen model by applying the Hausman test for FEM and REM, as well as the Sargan-Hansen and Arellano-Bond tests in the Generalized Method of Moments (GMM).
To enhance the empirical findings of this study, the author employs dummy variables, strategically integrating them into the most appropriate model following a thorough comparison in the second step.
The analysis of the outcomes from the aforementioned models aims to interpret their significance, providing essential insights for internal bank management and guiding banking regulation policies.
Methodology
2.2.1 Overview of previous research methodology
In terms of investigating the determinants of profitability, a large number of previous studies have approached qualitative methods with panel data regression
Dao & Nguyen (2020) conducted a study examining the relationship between the Capital Adequacy Ratio (CAR) and bank performance, specifically Return on Equity (ROE), in Vietnam Analyzing 128 observations from 16 commercial banks between 2010 and 2017, they utilized simultaneous equation systems to address the endogenous issues between CAR and ROE Their approach involved a joint dependence between CAR and ROE, estimated through Ordinary Least Squares (OLS) models To enhance the reliability of their findings, they employed the Wald Test to address insignificant variables in the model selection process.
A study conducted in Indonesia by Hersugondo (2021) analyzed the impact of capital on bank performance using quantitative methods, specifically panel data regression and purposive sampling The research measured bank performance through Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM), while also examining the influence of non-performing assets, capital adequacy, and insolvency risk within the same analytical framework.
A study by Ozili (2015) examines the factors influencing bank profitability in Nigeria under Basel capital regulation, employing a methodology akin to that of Hersugondo (2021) In contrast, Peterson (2015) enhances the regression analysis by incorporating external determinants such as GDP and inflation, along with dummy variables that represent the effects of capital regulation on bank profitability, specifically in calculating Return on Assets (ROA) The findings indicate that the determinants of bank profitability vary based on the profitability measure used.
26 and suggest the examination of ROE in further research with caution about impacts of the capital market along with bank-specific factors on ROE
A study by Ngan et al (2021) explored the effects of Capital Adequacy Ratio (CAR) on the profitability and risk levels of commercial banks in Vietnam Recognizing that the dependent variables, bank-level factors, and CAR are interrelated, the researchers employed the Generalized Method of Moments (GMM) based on the model established by Wu et al to analyze their findings.
This paper utilizes the Sargan test to verify the suitability of the chosen instrumental variables, addressing issues related to endogenous variables as outlined by Altunbas et al (2010) and others in 2020.
With the close purpose compared to our study, the research by Nguyen (2020) explores the impact of capital adequacy on bank profitability in the context of Basel
In a study by Nguyen (2020) on the implementation of II Accord in Vietnam, panel data regression analysis was conducted on a sample of 22 Vietnamese commercial banks from 2010 to 2018, revealing a positive correlation between bank capital adequacy, net interest margin, and non-interest income with profitability indicators The research utilized both the Fixed Effects Model (FEM) and Random Effects Model (REM) to estimate the regression equation, followed by the Hausman test to determine the appropriate model After identifying issues of heteroskedasticity and autocorrelation in the FEM model, the Generalized Method of Moments (GMM) was employed to address unobserved heterogeneity and endogeneity concerns, supported by the Hansen test and Arellano-Bond test.
& Bond, 1991) are applied to test the reliability of GMM model results (Nguyen,
In our analysis, we utilized endogenous variables as instruments, while clearly identifying exogenous variables By employing the Generalized Method of Moments (GMM), we incorporated instruments for all regressors To evaluate the model's robustness, we conducted Arellano-Bond autocorrelation tests and tests for over-identifying restrictions, as outlined by Hansen, to determine the appropriate number of lags.
1982) Le (2017) supposed the instruments do not fulfill the requisite orthogonality
If the null hypothesis of the Hansen test is rejected, it imposes 27 constraints Additionally, the moment criteria hold true only when idiosyncratic errors exhibit no serial correlation These criteria remain valid even if the null hypothesis regarding second-order autocorrelation (AR2) is not rejected (Le, 2017).
To address the limitations of previous studies on methodology and models, this research builds on Nguyen's (2020) approach, employing Fixed Effects Model (FEM) and Random Effects Model (REM) for panel data regression, followed by the Generalized Method of Moments (GMM) to resolve endogenous variable issues Additionally, it aims to analyze the factors influencing bank profitability during both crisis and non-crisis periods, referencing the case study conducted in Switzerland in 2010 by Dietrich and Wanzenried The study further validates the chosen model through the Hausman test for FEM and REM, as well as the Sargan-Hansen and Arellano-Bond tests for GMM.
This study examines the impact of Capital Adequacy Ratio (CAR) on the profitability of Vietnamese banks, considering both bank-specific characteristics and macroeconomic factors The research model aims to provide insights into how CAR influences banks' ability to generate profits within the Vietnamese banking sector.
Profitability it = α it + β 1 Bank-specific i,t + β 2 Macro-level it + ε it
Bank profitability at time t, represented by return on assets (ROA), return on equity (ROE), and net interest margin (NIM), is influenced by specific characteristics of bank i Key indicators include the capital adequacy ratio (CAR), the natural logarithm of total assets (LOG(TA)), the cost-to-income ratio (CI), liquidity of bank assets (LIQUID), financial leverage status (LEV), and the ratio of non-interest income to total net income (NII).
The income of commercial banks in Vietnam is influenced by various factors, including Loan Loss Provision (LLP) and Income Diversification (IncDiver) At a macro level, this relationship is affected by industry and macroeconomic variables such as GDP growth (GDPG) and inflation (INF) in year t Additionally, the model incorporates an error term (ε) and a constant term (α).
The study focuses on a sample of 21 Vietnamese commercial banks, characterized by various factors such as ownership structure (state-owned vs private), asset scale, and stock market listing status It includes banks that are piloting regulations on banking governance, specifically those measuring capital adequacy in accordance with Basel II standards approved by the State Bank of Vietnam The research distinguishes between banks that have independently implemented Basel II and those that have not Notably, the selection is limited to commercial banks, as they are the primary market players, while foreign bank affiliates and joint-venture banks have a more restricted presence in Vietnam's banking sector.
The variables used in the model are collected and calculated from the financial statements of 21 Vietnamese commercial banks in the sample for the period from
This study utilizes unbalanced panel data from the S&P CapitalIQ database, focusing on Vietnamese accounting standards from 2006 to 2021 Due to incomplete data disclosure by banks, particularly prior to 2010, the analysis captures the impacts of economic crises on bank profitability during this critical period.
Macroeconomic data for GDP and inflation are collected from the World Bank database which is consistent with the bank-level data, also obtained from the external
29 database The frequency of the dataset in this research is annual data, in both macro and micro-variables
Table 1 List of commercial banks in sample
No Name of Bank Abbreviation
2 Bank for Investment and Development of Vietnam BID
3 Vietnam Joint Stock Commercial Bank for Industry and
4 Vietnam Export Import Commercial Joint Stock Bank EIB
5 Ho Chi Minh City Development Joint Stock Commercial
6 Military Commercial Joint Stock Bank MBB
7 National Citizen Commercial Joint Stock Bank NVB
8 Saigon-Hanoi Commercial Joint Stock Bank SHB
9 Sai Gon Thuong Tin Commercial Joint Stock Bank STB
10 Vietnam Technological and Commercial Joint Stock Bank TCB
11 Tien Phong Commercial Joint Stock Bank TPB
12 Bank for Foreign Trade of Vietnam VCB
13 Vietnam Prosperity Joint Stock Commercial Bank VPB
14 Lien Viet Post Joint Stock Commercial Bank LPB
15 Vietnam International Commercial Joint Stock Bank VIB
16 Vietnam Bank for Agriculture and Rural Development AGR
17 Vietnam Maritime Commercial Joint Stock Bank MSB
18 Orient Commercial Joint Stock Bank OCB
19 Southeast Asia Commercial Joint Stock Bank SSB
20 Bac A Commercial Joint Stock Bank BAB
21 Kien Long Commercial Joint-Stock Bank KLB
The literature review has revealed the possible link between bank profitability and not only CAR but also other bank-featured and macroeconomic indicators The following
30 part is used to consider possible factors impacting banks’ earnings that are reviewed and studied in earlier documents, and suppose to be employed in model of this paper
This paper investigates bank profitability through key metrics such as return on assets (ROA), return on equity (ROE), and net interest margin (NIM) According to Phan et al (2020), profitability is a critical measure of banking efficiency that can be assessed using various ratios Burhonov (2006) identified several methods for measuring profitability, with ROA and ROE being the most widely used (Iqbal & Molyneux, 2005) Therefore, incorporating ROA and ROE into the model is essential for accurately reflecting bank profitability Additionally, NIM is included as it represents the difference between interest revenues and expenses, highlighting how effectively banks manage their capital resources (Saona, 2016) NIM serves as a vital indicator for assessing long-term profitability potential, particularly in the context of lending and deposit activities However, the Vietnamese banking system's high level of government intervention may complicate this analysis Despite this, the author integrates NIM with ROA and ROE to enhance the coherence and comprehensiveness of the research findings.
Results and Discussion
Descriptive statistics
Table 3 presents descriptive statistics for each variable used in the models, highlighting key metrics such as average values, standard deviations, and minimum and maximum values The research reveals that the average Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) for commercial banks in Vietnam are approximately 0.01, 0.13, and 0.31, respectively Additionally, the standard deviations for these variables are nearly 0.007, 0.08, and 0.137, indicating that while the profitability of these banks is relatively high, there is significant variation among them.
The average capital adequacy ratio (CAR) of Vietnamese banks stands at 13%, exceeding the Central Bank's mandated minimum of 8% as per Circular 41/2016/TT-NHNN However, this ratio varies significantly among different banks Additionally, total assets contribute to 18.64% of the banking sector, with a financial leverage ratio of 1.22 Notably, the maximum value of net interest income (NII) raises concerns, primarily due to a substantial decline in net income for NVB during 2020 and 2021, which resulted in a marked increase in the non-interest income ratio.
The Correlation Matrix table in the appendix provides insights into the relationships between profitability variables and bank characteristics Specifically, Table 10 presents the correlation coefficients, revealing positive correlations between Capital Adequacy Ratio (CAR) and Return on Assets (ROA) as well as Net Interest Margin (NIM), while indicating a negative correlation with Return on Equity (ROE) This initial overview highlights the interconnectedness of these financial metrics.
Variable Obs Mean Std Dev Min Max
Baseline regression results
The author employs Fixed Effects Model (FEM) and Random Effects Model (REM) to analyze the equations of Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) The Hausman test indicates that FEM is the more suitable estimation method for all three equations, with a p-value below 5% However, further examination of the FEM model reveals issues of heteroscedasticity and autocorrelation To address these concerns, the author incorporates the Generalized Method of Moments (GMM) for estimation To validate the GMM model, the Hansen test and Arellano-Bond test are conducted, with results closer to 1 indicating greater reliability Ultimately, the baseline regression results predominantly highlight the relationships identified using GMM methods.
Table 4 Baseline regression results – Dependent Variable: ROA
Note: Standard errors in parentheses
The results of the ROA regression indicate that the lag variable of ROA is both positive and statistically significant at the 5% level, demonstrating that ROA is an effective measure of a bank's profitability.
Table 4 illustrates the impact of controlling variables, including bank-specific and macroeconomic indicators, on bank profitability as indicated by return on assets The positive computed coefficients and a statistically significant p-value of 5% confirm that the Capital Adequacy Ratio (CAR) is positively associated with bank profitability metrics.
Bank capital adequacy significantly influences bank profitability, as institutions with stronger financial resources are more inclined to engage in lucrative banking activities, allowing them to better absorb unexpected losses (Nguyen, 2020) This positive correlation has been supported by numerous studies, including those by Bourke (1989), Molynexu and Thornton (1992), Olalekan & Adeyinka (2013), Agbeja et al (2015), Ozili (2015), Athanasoglou et al (2008), Batten & Vo (2019), and Ha (2020).
The analysis of bank size indicators reveals a positive relationship with bank profitability, as indicated by a statistically significant p-value at 5% in the context of Return on Assets (ROA) This finding aligns with the notion that a higher Capital Adequacy Ratio (CAR) positively influences bank profitability, suggesting a coherent connection between bank size and profitability metrics.
The analysis reveals that the cost-to-income ratio significantly negatively impacts bank earnings, with a p-value of 5% as shown in Table 3 This finding aligns with previous research by Muriithi & Muigai (2017), Dao & Nguyen (2020), and Dietrich & Wanzenried (2011), confirming that improving operational efficiency can enhance bank profitability as measured by ROA.
Research indicates a positive correlation between the non-interest income ratio and bank profitability, specifically in relation to Return on Assets (ROA), with a significant impact at the 10% level This finding aligns with previous studies by Ngan et al (2021), Le et al (2017), Phan et al (2020), and Pham & Nguyen (2017), reinforcing the importance of non-interest income in enhancing revenue quality and diversification for banks Additionally, the results suggest that income diversification is linked to improved profitability, indicating that banks with a variety of income sources tend to achieve better financial performance.
In terms of macro indicators, the relationship of GDPG and ROA is revealed significantly at 1%, positively and the impact of inflation on ROA is negative as
43 expected but insignificant Research conducted by Athanasoglou et al (2008), Demirgỹỗ & Huizinga (1999), Dietrich & Wanzenried (2014), Le (2017), Phan et al
According to Nguyen et al (2018) and Dermirguc & Huizingga (1999), the findings indicate that Vietnam's economic growth, driven by financial improvements, creates a favorable environment for commercial banks, enhancing their profitability The impact of inflation on bank profitability is contingent upon the efficiency of management within the banking system; accurate inflation predictions can lead to quicker earnings than costs However, in Vietnam's emerging banking sector, higher inflation tends to escalate potential expenses more than banks can increase their income.
Table 5 Baseline regression results – Dependent Variable: ROE
The study reveals that the dependent variable for bank profitability, measured by Return on Equity (ROE), shows a positive lag variable under the Generalized Method of Moments (GMM) Additionally, the Hansen test and Arellano-Bond results approach 1, indicating that the model is acceptable.
Research by Dao & Nguyen (2020), Batten & Vo (2019), and Ha (2020) indicates a negative coefficient when assessing the impact of Capital Adequacy Ratio (CAR) on Return on Equity (ROE) This suggests that as equity replaces debt, an increase in CAR reduces potential risks, consequently leading to a decrease in profitability derived from securities The significance of this finding is marked at a 10% p-value.
The size of a bank and its cost-to-income ratio significantly affect both Return on Equity (ROE) and Return on Assets (ROA), with a p-value of 10% This finding aligns with the research of Dao & Nguyen (2020), Nguyen (2020), Ngan et al (2021), and Goddard et al (2004), but contrasts with the conclusions drawn by Le (2017) and Dietrich & Wanzenried (2014).
A significant coefficient of 10% between financial leverage and return on equity suggests that efficient leverage can reduce expenses associated with equity, thereby enhancing firm value and profitability However, high leverage levels correspond to lower reserved capital, aligning with the previously identified negative impacts of CAR This finding is consistent with several prior studies, including those by Naceur & Kandil.
(2009), Dietrich & Wanzenried (2014), Athanasoglou et al (2008), Hersugondo
Various indicators such as income diversification, GDP growth, and inflation exhibit similar effects on Return on Equity (ROE) as they do on Return on Assets (ROA) Studies by Ha (2020) and Nguyen (2020) support this perspective, while Batten & Vo (2019) present contrasting findings, noting a positive yet non-significant relationship with GDP growth and a significant negative impact from inflation in their GMM estimation In the context of Vietnam, an emerging market, the influence of GDP growth is anticipated to be more pronounced, as financial development often enhances institutional performance compared to other fluctuating macroeconomic factors.
Table 6 Baseline regression results – Dependent Variable: NIM
The Hausman test indicates that the Random Effects Model (REM) is more suitable than the Fixed Effects Model (FEM) for analyzing Net Interest Margin (NIM), as the test statistic is greater than 5% However, the REM still exhibits issues with autocorrelation and endogeneity Therefore, the author utilized the Generalized Method of Moments (GMM) for further calculations, supported by the results from the Hansen test and the Autoregressive (AR) analysis.
The relationship between Capital Adequacy Ratio (CAR) and Net Interest Margin (NIM) reveals a positive but statistically insignificant impact, as noted by Lee & Hsieh (2013), Dao & Nguyen (2016), and Ha (2020) While short-term improvements in CAR may adversely affect NIM, long-term effects appear minimal Additionally, bank size, cost-to-income ratio, and GDP growth exhibit similar correlations with NIM as seen in Return on Assets (ROA) and Return on Equity (ROE) However, income diversification does not significantly influence NIM, and inflation is associated with negative impacts on NIM, though these effects are not substantial.
Extended regression model
The author utilized dummy variables related to Basel II application, ownership status, and crisis periods to extend the regression analysis under the GMM estimation method, as indicated by the ROA, ROE, and NIM equations The model's reliability is validated through the Hansen test and AR (2) results presented in tables Additionally, built-in variables such as CAR and REG, STATE and CRISIS are incorporated into the equations to assess their effects on bank profitability Consequently, the extended equations for these three dummy variables are formulated accordingly.
The profitability of banks can be modeled using several key variables: it is influenced by bank-specific factors, macroeconomic conditions, and the interaction between capital adequacy ratios (CAR) and various external contexts such as state, region, or economic crises These relationships can be expressed in three distinct equations, highlighting how profitability is affected by both internal characteristics and external economic environments Understanding these dynamics is crucial for analyzing bank performance and making informed financial decisions.
The profitability of bank i at time t is measured through return on assets (ROA), return on equity (ROE), and net interest margin (NIM) The bank-specific indicators include capital adequacy ratio (CAR), the natural logarithm of total assets (LOG(TA)), cost-to-income ratio (CI), liquidity of bank assets (LIQUID), financial leverage (LEV), non-interest income ratio (NII), loan loss provision (LLP), and income diversification (IncDiver) Macro-level variables encompass industry and macroeconomic factors such as GDP growth (GDPG) and inflation (INF) in Vietnam during year t The ownership status (STATE) indicates whether bank i is state-owned (value of 1) or not (value of 0) Compliance with Basel II regulations (REG) is noted as 1 if compliant and 0 otherwise The variable CRISIS denotes periods of economic uncertainty, taking the value of 1 during the Great Recession or the Covid-19 pandemic, and 0 at other times The model also includes an error term (ε) and a constant term (α).
Table 7 Extended regression results – Dependent variable: ROA
Table 8 Extended regression results – Dependent variable: ROE
Table 9 Extended regression results – Dependent variable: NIM
The study examines the effects of Capital Adequacy Ratio (CAR) on Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) across three extended models, highlighting a significant positive relationship between CAR and ROA Overall, the findings reveal that the impact of CAR in the extended models closely aligns with that observed in the baseline models.
The application of Basel II has shown a positive and significant impact on both Return on Assets (ROA) and Return on Equity (ROE), while its effect on Net Interest Margin (NIM) remains insignificant Research by Ozili (2015) indicates that regulatory changes before and after Basel II implementation did not affect NIM or ROA, aligning with Nguyen's (2020) findings of Basel II's positive influence on ROA and ROE Over the long term, adherence to regulations enhances public confidence, leading to increased investments and improved internal management processes Consequently, the implementation of Basel II is crucial for effective bank management.
Bank ownership significantly negatively impacts Return on Assets (ROA) and Return on Equity (ROE), aligning with findings from previous studies (Nguyen, 2020; Ngan et al., 2021; Hersugondo, 2021).
In the Vietnamese financial market, 52 private banks operate with less government oversight, enabling them to achieve higher profits and faster growth However, the state variable in the Net Interest Margin (NIM) equation does not significantly influence bank profitability, a finding consistent with Dietrich & Wanzenried (2011), which also identified NIM as a dependent variable in their research.
The analysis reveals that the CRISIS has a significant negative impact on banks' profitability, particularly affecting the Return on Assets (ROA) at a 5% p-value This finding contrasts with previous studies, such as Nguyen (2020), which reported no significant relationship between ROA and CRISIS, and Căpraru & Ihnatov (2014), which noted considerable but positive and insignificant effects of the crisis on ROA and Return on Equity (ROE) The uncertainty's detrimental influence on the overall economy is unavoidable, and as a crucial component of a country's financial stability, the banking sector is susceptible to downturns In the context of Vietnam, the banking system experiences a lagged economic impact compared to the global market, resulting in a vague effect during the crisis's onset, which may explain the insignificance of certain findings.
Bank size positively influences profitability at a significant level (1% p-value) across ROA, ROE, and NIM metrics Larger commercial banks in Vietnam experience heightened operating efficiency, especially when dummy variables are included in the analysis Additionally, bank-specific indicators such as Cost-to-Income (CI) and Net Interest Income (NII) similarly impact profitability, consistent with baseline regression findings On a macroeconomic level, GDP growth positively affects bank profitability (1% p-value), while inflation negatively impacts earnings across all extended regression models This suggests that GDP growth supports the success of commercial banks, whereas rising inflation and interest rates may detrimentally affect their earnings.
Recommendation
For Vietnamese commercial banks
Regression analysis indicates that a higher Capital Adequacy Ratio (CAR) positively influences profitability and mitigates risk for Vietnamese commercial banks from 2005 to 2019 Notably, the impact of CAR on profitability is more pronounced in banks that have adopted the Basel II framework Consequently, recommendations are made for Vietnamese commercial banks to establish an appropriate CAR ratio that aligns with the capital adequacy requirements outlined in Circular 41/2016/TT-NHNN and Basel II.
To ensure compliance with Basel implementation, small commercial banks in Vietnam, including Bao Viet Bank, An Binh Bank, PG Bank, and Saigon Bank, must prioritize the prompt enhancement of their Capital Adequacy Ratio (CAR).
Despite the challenges posed by the Covid-19 pandemic, commercial banks have the opportunity to enhance their Capital Adequacy Ratio (CAR) by increasing capital through retained earnings Many banks have reported strong business performance and have successfully raised capital via the stock market, which has experienced significant growth recently (Ngan et al., 2021).
To enhance their Capital Adequacy Ratio (CAR) during the current epidemic, commercial banks are strategically reducing risky assets Despite many customers facing challenges in loan repayment, the higher adjusted interest rates allow banks to effectively modify their loan portfolios This enables them to focus on customers with lower risk profiles or limited growth potential, thereby stabilizing their financial positions.
Bank managers must recognize the delayed impacts of global crises on profitability and proactively prepare for potential risks that could result in financial losses Following the Covid-19 pandemic, the financial landscape has experienced significant volatility, underscoring the need for strategic risk management in the banking sector.
The global landscape is currently marked by significant challenges, including the Russo-Ukrainian War and an energy crisis that has led to soaring gasoline prices Additionally, nations are grappling with the economic repercussions of the Covid-19 pandemic, which has intensified inflationary pressures In this turbulent environment, it is crucial for banking systems to adopt effective strategies to safeguard their operations Vietnamese commercial banks, in particular, can enhance profitability by focusing on reducing operating costs and boosting non-interest income, especially during the Basel II implementation process Embracing modern technology and diversifying investment channels are essential strategies that can help banks mitigate risks and strengthen their resilience Specifically, the integration of digital technology in products and services will enable commercial banks to diversify their revenue streams and asset portfolios, thereby decreasing reliance on credit products and enhancing overall income stability.
To enhance the competitiveness of Vietnam's banking sector, a restructuring of commercial bank ownership is essential, particularly as private banks demonstrate higher profitability than state-owned banks While complete withdrawal of Central Bank and government oversight is unfeasible, state-owned banks must reduce their reliance on government directives and develop independent strategies In a balanced market where all banks compete equally, it is crucial for state-owned banks to make informed decisions and formulate robust strategies The "big four" state-owned banks, which consistently rank among the top in capital and development on the stock market, should focus on optimizing profitability while actively pursuing restructuring to support their future growth.
58 is also effective with other joint stock commercial banks in which the Government hold a great proportion of shares in banks.
For the Governor
Compliance with the Basel II framework is essential for maintaining the financial health of the economy, necessitating continuous oversight by governments and central banks in commercial banks' implementation processes The Central Bank must supervise compiled banks to ensure adherence to the Basel framework and appropriate Capital Adequacy Ratio (CAR) levels For non-compliant banks, the Central Bank should regularly review their performance to prevent manipulation of reporting results, especially following the issuance of Circular 22/2019/TT-NHNN, which extended the Basel II deadline It is crucial to follow the Basel implementation roadmap while ensuring its appropriateness, particularly as foreign banks have adopted all three pillars of Basel II Additionally, the Government should prepare for the Basel III implementation roadmap, with the Central Bank setting credit growth targets at the year's start to facilitate proactive business planning by credit institutions Early regulation on automatic credit granting based on data models, along with credit transactions via digital channels, is also necessary A unified management and sharing mechanism for population data, real estate, and public services is vital to enhance transparency and support credit institutions in their reviews and verifications.
In light of global uncertainty, it is crucial for governments to prepare the banking system for potential turbulence The banking sector plays a key role in maintaining the financial stability and health of a nation, making the protection of these institutions a vital responsibility for governors Therefore, the implementation of Basel regulations must be prioritized to ensure resilience in the banking system.
Regulatory guidance and circulars serve as essential tools for banks to safeguard their operations, particularly during uncertain times The Central Bank can utilize monetary policy to adjust interest rates, ensuring that banking activities remain stable It's crucial to balance the growth of all economic components, as a stable banking system, alongside other businesses and organizations, contributes to the overall financial health of the nation This paper highlights a consistent positive correlation between GDP and bank profitability, while indicating a negative relationship with inflation Therefore, fostering a healthy market environment is vital for the banking industry's growth, enhancing profitability, and achieving government objectives, given the significant role of effective regulation and economic management.
The negative impact of state ownership on banks highlights the need for the Governor to prioritize the restructuring of state-owned banks Rather than imposing restrictive controls on a few institutions, the Government should implement equitable interventions across the banking sector to promote a competitive market economy As many state-owned banks are significant contributors to total equity, restructuring these institutions can enhance their efficiency and profitability, benefiting not only the banks themselves but also the overall banking system.
This paper investigates the influence of bank capital adequacy on profitability, measured by return on assets, return on equity, and net interest margin, within Vietnamese banks under Basel II regulations It includes a sub-sample analysis that examines the effects of Basel II implementation, state ownership, and crisis periods Utilizing panel data regression on a sample of 21 Vietnamese commercial banks from 2006 to 2021, the study finds a positive correlation between bank capital adequacy, bank size, and GDP growth with profitability, while the cost-to-income ratio and inflation negatively affect bank profitability.
A subsample analysis of dummy variables reveals that bank capital adequacy positively influences return on assets for both state-owned and private banks from 2006 to 2021 The findings suggest that increasing private ownership in banks may enhance profitability, as private banks demonstrate greater financial returns However, Vietnamese banks should exercise caution in their diversification strategies aimed at improving profitability, as research by Vo (2017a) indicates that investors in the Vietnamese stock market favor banks that focus on traditional business models This insight is particularly relevant for Vietnamese banks operating under Basel regulations.
During the crisis period, the implementation of II, return on assets, and return on equity in Vietnamese banks showed no significant correlation, indicating that these institutions experienced a time lag in their responses to uncertainty.
Vietnamese banks are advised to reassess the capital requirements in line with international standards to boost profitability Additionally, given the positive correlation between income diversification and bank profitability, it is essential for these banks to shift their long-term vision and strategy Prioritizing the benefits for clients, depositors, and borrowers over solely focusing on bank interests will lead to a more sustainable and profitable future.
Adeusi, S., Kolapo, F., & Aluko, A (2014) Determinants of Commercial Banks’ Profitability Panel Evidence from Nigeria International Journal of Economics,
Commerce and Management, 2(12), 1-18 Available at: http:// ijecm.co.uk/wp- content/uploads/2014/12/21228.pdf
Almumani, A M (2013) Impact of Managerial Factors on Commercial Bank Profitability: Empirical Evidence from Jordan International Journal of Academic
Research in Accounting, Finance and Management Science Vol 3, No 3, July 2013, pp 298 – 310
AL-Qudah, A M (2020) Macroeconomic and bank-specific variables and the Liquidity of Jordanian Commercial Banks The Journal of Asian Finance, Economics and Business, 7(12), 85–93 https://doi.org/10.13106/jafeb.2020.vol7.no12.085
Altunbas, Y., Gambacorta, L & Marques-Ibanez, D (2010), Bank risk and monetary policy, Journal of Financial Stability, 6(3),121–129
Ani, W U., Ugwunta, D O., Ezeudu, I J., and Ugwuanyi, G O (2012), An empirical assessment of the determinants of banks profitability in Nigeria: Bank characteristics panel evidence, Journal of Accountring and Taxation Vol 4(3), pp 38-43, December,
2012 Available online at http://www.academicjournals.org/JAT
Arellano, M and S Bond (1991), Some Tests of Specification for Panel Data: Monte
Carlo Evidence and an Application to Employment Equations, Review of Economic
Athanasoglou, P P, Brissimis, N S., Delis, D M (2008), Bank-specific, industry- specific and macroeconomic determinants of bank profitability Journal of
International Financial Markets, Institutions and Money Vol 18, Issue 2, April 2008, pp 121-136
Athanasoglou, P P, Brissimis, N S., Delis, D M (2008), Bank-specific, industry- specific and macroeconomic determinants of bank profitability Journal of
International Financial Markets, Institutions and Money Vol 18, Issue 2, April 2008, pp 121-136
Batten, J and X.V Vo (2016), Bank Risk Shifting and Diversification in an Emerging
Ben Naceur, S (2003) The determinants of the Tunisian banking industry profitability: panel evidence, Paper presented at the Economic Research Forum (ERF)
10th Annual Conference, Marrakesh-Morocco, and 16-18 December
Binh, T T D., & Dung, P N (2020) Determinants of Profitability in Commercial Banks in Vietnam, Malaysia and Thailand Journal of Asian Finance, Economics and
Business, 7(4), 133-143 https://doi.org/10.13106/jafeb.2020.vol7.no4.133
Bourke, P (1989) Concentration and Other Determinants of Bank Profitability in Europe, North America and Australia Journal of Banking and Finance 13, 65- 79
Burhonov, J (2006) Islamic banking operations of commercial banks under Islamic
Banking scheme (IBS) of Malaysia: The performance analysis Master Thesis
Calem, P., Rob, R (1999) The Impact of Capital-Based Regulation on Bank Risk- Taking Journal of Financial Intermediation, Vol 8, No.4, pp 317-352
Căpraru and Ihnatov (2014) analyze the profitability of banks in selected Central and Eastern European countries, presenting their findings at the 21st International Economic Conference Their research, published in Procedia Economics and Finance, highlights key factors influencing bank performance in the region The study provides valuable insights for understanding the dynamics of the banking sector in Central and Eastern Europe, making it a significant contribution to economic literature For further details, the full article is accessible online.
Claessens, S and Klingebiel, D (2000) Competition and scope of activities in financial services Mimeo World Bank, Washington D.C., April
Dang, V.D (2019), Should Vietnamese Banks Need More Equity? Evidence on Risk-
Return Trade-off in Dynamic Models of Banking, Journal of Risk and Financial
Dao, B T T and Nguyen, K A (2020), Bank Capital Adequacy Ratio and Bank Performance in Vietnam: A Simultaneous Equations Framework, The Journal of
Asian Finance, Economics and Business Korea Distribution Science Association, 7(6), pp 39–46 doi: 10.13106/JAFEB.2020.VOL7.NO6.039
Dao, T T B., & Nguyen, T N (2016) Determinant factors of capital adequacy ratio in Vietnamese commercial banks VNU Journal of Science: Economics and Business,
Demiguc-Kunt, A and H Huizinga (1999), Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence, The World Bank
Dietrich, A & Wanzenried, G (2011) Determinants of bank profitability before and during the crisis: Evidence from Switzerlan Journal of International Financial
Dung, L C., Thuan, N T., & Tin, P Q (2015) Study the impact of income from non- credit activities on the profitability of Vietnamese commercial banks Journal of
Elbannan, M.A (2017), The Financial Crisis, Basel Accords and Bank Regulations:
An Overview, International Journal of Accounting and Financial Reporting, 7(2), 225-
Fungacova, Zuzana, Laura Solanko, and Laurent Weill (2014) Does competition influence the bank lending channel in the Euro area? Journal of Banking and Finance 49: 356–66 [https://doi.org/10.1016/j.jbankfin.2014.06.018]
Goddard, J., Molyneux, P., and Wilson, J.O.C (2004) The profitability of European banks: A cross sectional and dynamic panel analysis The Manchester School, 72 (3),
Ha, V (2020) Does bank capital affect profitability and risk in Vietnam?.Accounting, 6(3), 273-278 doi: 10.5267/j.ac.2020.2.008
Hansen, LP 1982, Large sample properties of generalized method of moments estimators, Econometrica, vol 50, no 4, pp 1029-1054
Hassan, K & Abdel-Hammed, M B (2008) Determinants of Islamic Banking Profitability, Economic Research Forum Paper q, 1-32
Hersugondo, H., Anjani, N and Pamungkas, I D (2021) “The Role of Non-
Performing Asset, Capital, Adequacy and Insolvency Risk on Bank Performance: A Case Study in Indonesia, The Journal of Asian Finance, Economics and Business
Korea Distribution Science Association, 8(3), pp 319–329 doi: 10.13106/JAFEB.2021.VOL8.NO3.0319
Iqbal, M & Molyneux, P (2005) Development of the Islamic Banking Model In: Thirty Years of Islamic Banking Palgrave Macmillan Studies in Banking and
Financial Institutions, London, UK: Palgrave Macmillan
Le, Tu, (2017), The Determinants of Commercial Bank Profitability in Vietnam (September 30, 2017) Available at SSRN: https://ssrn.com/abstract048571 or http://dx.doi.org/10.2139/ssrn.3048571
Lee, C C., & Hsieh, M F (2013) The impact of bank capital on profitability and risk in Asian Banking Journal of International Money and Finance, 32, 251–281
Lepetit, L, Nys, E, Rous, P & Tarazi, A 2008, Bank income structure and risk: An empirical analysis of European banks, Journal of Banking & Finance, vol 32, no 8, pp 1452-1467
Levine, R (1997), Financial Development and Economic Growth: Views and Agenda, Journal of Economic Literature, 35(2), 688-726
Lotto, Josephat (2018), The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency, International Journal of Financial Studies 6, no 2: 34 https://doi.org/10.3390/ijfs6020034
Luong, T M N and Nguyen, P A (2021) Optimal Capital Adequacy Ratios for Commercial Banks: Empirical Evidence from Vietnam, The Journal of Asian Finance,
Economics and Business Korea Distribution Science Association, 8(10), pp 47–56 doi: 10.13106/JAFEB.2021.VOL8.NO10.0047
Micco, A., Panizza, U., Yanez, M., (2007), Bank ownership and performance Does politics matter? Journal of Banking and Finance 31 (1), 219–241
Molynexu, P & Thornton, J (1992) Determinants of European Bank Profitability A Note, Journal of Banking and Finance.16: 1173-1180
Naceur, B S & Kandil, M (2009) The impact of capital requirements on banks’ cost of intermediation and performance: The case of Egypt Journal of Economics and
Ngo, P T H (2006) Endogenous capital and profitability in banking Australian national university, college of Business and Economics, School of Economics Working Papers, 464, 131-154
Nguyen, Thi Hien, (2020), Impact of Bank Capital Adequacy on Bank Profitability under Basel II Accord: Evidence from Vietnam, Journal of Economic Development, 45, issue 1, p 31-46
Ogboi and Unuafe (2013) examine the influence of credit risk management and capital adequacy on the financial performance of commercial banks in Nigeria Their study, published in the Journal of Emerging Issues in Economics, Finance, and Banking, highlights the critical role these factors play in enhancing bank stability and profitability The findings suggest that effective credit risk management and sufficient capital reserves are essential for improving the overall performance of Nigerian commercial banks.
Ozili, K P (2015) Determinants of Bank Profitability and Basel Capital Regulation:
Empirical Evidence from Nigeria Research Journal of Finance and Accounting, 6(2),
Pervan, M, Pelivan, I & Arnerić, J 2015, Profit persistence and determinants of bank profitability in Croatia, Economic Research-Ekonomska Istraživanja, vol 28, no 1, pp 284-298
Phan, T H., Hoang, N T., Dinh, V L., Hoang, N D., (2020) The Determinants of
Listed Commercial Banks’ Profitability in Vietnam, The Journal of Asian Finance,
Economics and Business Korea Distribution Science Association, 7(11), pp 219–
Samad, A (2015) Determinants bank profitability: Empirical evidence from Bangladesh commercial banks International Journal of Financial Research, 6(3), 173–179 doi: https://doi.org/10.5430/ijfr v6n3p173
Santos, J A C (2000) Bank capital regulation in contemporary banking theory: a review of literature, BIS working Papers, No 90, pp 1-32
Saona, P (2016), Intra-and extra-bank determinants of Latin American Banks' profitability, International Review of Economics & Finance, vol 45, pp 197-214
Shah, S M R., LI, J., & FU, Q (2020) What Prompted Shadow Banking in China? Wealth Management Products and Regulatory Arbitrage The Journal of Asian
Finance, Economics and Business, 7(12), 63–72 https://doi.org/10.13106/jafeb.2020.vol7.no12.063
Sharma, P, Gounder, N & Xiang, D 2013, Foreign banks, profits, market power and efficiency in PICs: some evidence from Fiji Applied Financial Economics, vol 23, no 22, pp 1733-1744
Short, B (1979) The Relationship between Commercial Bank Profit Rates and Banking Concentration in Canada, Western Europe and Japan, Journal of Banking and Finance, 3, 209-19
Stewart, C, Matousek, R & Nguyen, TN (2016), Efficiency in the Vietnamese banking system: A DEA double bootstrap approach, Research in International Business and
Tan, Y & Floros, C 2012, Bank profitability and GDP growth in China: a note,
Journal of Chinese Economic and Business Studies, vol 10, no 3, pp 267-273
Vu and Nahm (2013), The Determinants of Profit Efficiency of Banks in Vietnam,
Journal of the Asia Pacific Economy, 18(4), 615-631
Wu, J., Chen, L., Chen, M & Jeon, B.N (2020), Diversification, efficiency and risk of banks: Evidence from emerging economies, Emerging Markets Review, 45, 100720
APPENDIX Table 10: Correlation matrix among variables
NIM ROA ROE CAR LOG(TA) CI LIQUID LEV NII LLP IncDiver GDP INF
KẾT QUẢ KIỂM TRA ĐẠO VĂN