Factor affecting bank profitability of commercial banks in Vietnam from 2008 to 2020, 2021

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

TIEU QUOC PHONG

FACTORS AFFECTING BANK PROFITABILITY OF COMMERCIAL

BANKS IN VIETNAM FROM 2008 TO 2020

BACHERLOR THESIS

MAJOR: FINANCE – BANKING

NUMBER: 7340201

HCMC, SEPTEMBER 2021

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

TIEU QUOC PHONG

FACTORS AFFECTING BANK PROFITABILITY OF COMMERCIAL

BANKS IN VIETNAM FROM 2008 TO 2020

BACHERLOR THESIS

MAJOR: FINANCE – BANKING

NUMBER: 7340201

INSTRUCTOR:

PH.D NGUYEN THI NHU QUYNH

HCMC, SEPTEMBER 2021

ACKNOWLEDGEMENT

It is my radiant sentiment to place on record my best regards, deepest sense of

gratitude to my supervisor at Banking University in Ho Chi Minh City - Ms. Nguyen

Thi Nhu Quynh for her patience, motivation, enthusiasm, and immense knowledge.

She has wholeheartedly helped and guided me in the process of writing this thesis. I

choose this moment to acknowledge her contribution as she has been supportive of

my study and has actively provided me with enormous information to achieve the

goal.

Also I would like to thank all of my friends, who always support and help me

through the study together with the inspiration they gave me.

Author

Tieu Quoc Phong

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ........................................................................ i

LIST OF TABLES ........................................................................................ ii

CHAPTER 1. INTRODUCTION.......................................................................1

1.1 THE NECESSITY OF THE RESEARCH..........................................1

1.2 RESEARCH OBJECTIVES................................................................1

1.2.1 General objective ............................................................................1

1.2.2 Specific objectives ..........................................................................2

1.3 RESEARCH QUESTIONS.................................................................2

1.4 SUBJECTS AND THE SCOPE OF THE RESEARCH .....................2

1.4.1 Research subject..............................................................................2

1.4.2 Research scope................................................................................2

1.5 DATA AND RESEARCH METHODOLOGY ..................................3

1.5.1 Data .................................................................................................3

1.5.2 Methodology ...................................................................................3

1.6 THE THESIS CONTRIBUTIONS .....................................................4

1.6.1 Practical implications......................................................................4

1.6.2 Academy implications ....................................................................4

1.7 STRUCTURE OF THE THESIS ........................................................4

SUMMARY OF CHAPTER..........................................................................5

CHAPTER 2. THEORETICAL BASIC AND LITERATURE REVIEW ........6

2.1 THEORETICAL FRAMEWORK ......................................................6

2.1.1 Overview of commercial bank........................................................6

2.1.2 Functions of commercial banks......................................................7

2.1.3 Measure bank profitability..............................................................7

2.2 EMPIRICAL STUDIES REVIEW .....................................................9

2.2.1 Foreign research..............................................................................9

2.2.2 Domestic research.........................................................................11

2.3 RESEARCH GAP .............................................................................12

SUMMARY OF CHAPTER........................................................................12

CHAPTER 3. DATA AND METHODOLOGY..............................................14

3.1 RESEARCH METHODOLOGY......................................................14

3.2 RESEARCH MODELS.....................................................................15

3.2.1 Research model.............................................................................16

3.2.2 Dependent variables......................................................................16

3.2.3 Independent variable .....................................................................19

3.3 RESEARCH DATA..........................................................................25

SUMMARY OF CHAPTER........................................................................25

CHAPTER 4. EMPIRICAL RESULTS...........................................................27

4.1 DATA DESCRIPTION.....................................................................27

4.2 CORRELATION MATRIX..............................................................28

4.3 REGRESSION MODELS.................................................................30

4.3.1 Model 1 – Dependent variable: ROE............................................30

4.3.2 Model 2 – Dependent variable: ROA ...........................................34

4.3.3 Model 3 – Dependent variable: NIM............................................38

4.4 DISCUSSION ...................................................................................41

4.4.1 Bank size (SIZE)...........................................................................41

4.4.2 Capital ratio (CAP) .......................................................................42

4.4.3 Liquidity (LOAN).........................................................................42

4.4.4 Deposit ratio (DEP).......................................................................43

4.4.5 Gross domestic product (GDP).....................................................44

4.4.6 Inflation rate (INF)........................................................................44

4.4.7 Credit growth rate (CGR) .............................................................45

SUMMARY OF CHAPTER........................................................................45

CHAPTER 5. CONCLUSIONS AND RECOMMENDATIONS ...................47

5.1 CONCLUSIONS ...............................................................................47

5.2 RECOMMENDATIONS ..................................................................48

5.3 RESEARCH LIMITATIONS AND THE NEXT SUGGEST STUDY

49

REFERENCES............................................................................................. iii

APPENDIX .................................................................................................. iv

i

LIST OF ABBREVIATIONS

Abberviation Meaning

FEM Fixed effect model

REM Random effect model

GDP Gross domestic product

ROE Return on equity

ROA Retuen on asset

NIM Net interest margin

Pooled OLS Pooled Ordinary Least Squares

VIF Variance Inflation Factor

INF Inflation

FGLS Feasible Generalized Least Squares