Factors affecting credit risk of joint stock commercial banks in Vietnam, 2022

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MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIETNAM

HO CHI MINH UNIVERSITY OF BANKING

ĐỖ NGUYỄN HIỀN HOA

FACTORS AFFECTING CREDIT RISK OF JOINT STOCK

COMMERCIAL BANKS IN VIETNAM

GRADUATION THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

HO CHI MINH CITY, 2022

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MINISTRY OF EDUCATION AND TRANING THE STATE BANK OF VIETNAM

HO CHI MINH UNIVERSITY OF BANKING

ĐỖ NGUYỄN HIỀN HOA

FACTORS AFFECTING CREDIT RISK OF JOINT STOCK

COMMERCIAL BANKS IN VIETNAM

GRADUATION THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

Instructor

DR. LÊ HÀ DIỄM CHI

HO CHI MINH CITY, 2022

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ABSTRACT

“Factors affecting credit risk of joint stock commercial bank in Vietnam” using data

from 25 commercial banks on a panel data sample from 2010 to 2020. The independent

variables are CAR (capital adequacy ratio), CAP (ratio of capital), ROA (ratio of

profitability), SIZE (bank size), NPL (non-performing loan), GROW (credit growth), UPR

(unemployment rate), GDP (GDP growth) and INF (inflation) are macro dependent variables

on credit risk. The goal of this study was to examine the impact of common factors o the

credit risk of commercial banks in Vietnam. The S - GMM regression model is used in this

study to examine the factors affecting the credit risk of 25 commercial banks in Vietnam

from 2010 to 2020.

Keywords: Credit risk, Commercial Bank, Vietnam.

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GUARANTEE

My name is Do Nguyen Hien Hoa, and I am a student at the Banking University of Ho

Chi Minh City, class HQ6 – GE11, student number: 050606180116.

I hereby declare that the thesis topic "Factor affecting the credit risk of joint stock

commercial banks in Vietnam" majoring in Finance - Banking, is my own research work that

I directed. Dr. Le Ha Diem Chi's scientific advisor. The data and research findings in this

thesis are honest, with no previously published or made by others except for fully cited

citations in the thesis.

HCM City, 1 June, 2022

Author

DO NGUYEN HIEN HOA

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ACKNOWLEDGEMENT

First and foremost, I would like to thank my research supervisors, Dr. Le Ha Diem Chi.

Without her assistance and dedicated involvement in every step throughout the process, this

paper could have never been accomplished. I am extremely grateful to you for supporting

and understanding me during the past time.

I would also like to show gratitude to the teachers of Ho Chi Minh City University Of

Banking - who have imparted valuable knowledge to me during the four years of the

University. Thank you for giving me the opportunity to meet and study at Ho Chi Minh City

University of Banking. Getting through my dissertation required more than academic

support, and I have many, many teachers to thank for listening to and, at times, having to

tolerate me over the past four years.

Finally, I would like to express my heartfelt appreciation to my family and friends,

who have always helped, accompanied, and supported me over the years.

With limited knowledge and circumstances, this thesis cannot avoid many flaws. As a

result, I am looking forward to receiving teacher guidance so that I can improve my

knowledge and serve my work in the future.

Sincerely thank everyone!

HCM City, 1 June, 2022

Author

Do Nguyen Hien Hoa

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Contents

ABSTRACT..................................................................................................................... 3

GUARANTEE................................................................................................................. 4

THANK YOU................................................................ Error! Bookmark not defined.

LIST OF ACRONYMS ................................................................................................. 10

LIST OF TABLES AND DIAGRAMS......................................................................... 11

CHAPTER 1: INTRODUCTION.................................................................................. 12

1.1 REASONALE FOR RESEARCH ....................................................................... 12

1.2 RESEARCH OBJECTIVES................................................................................. 12

1.2.1 Overall objectives......................................................................................... 12

1.2.2 Detail objectives ........................................................................................... 12

1.3 RESEARCH QUESTIONS.................................................................................. 13

1.4 OBJECTS AND RESEARCH SCOPE................................................................ 13

1.4.1 Research object ............................................................................................ 13

1.4.2 Research scope ............................................................................................. 13

1.5 SCIENTIFIC AND PRACTICAL SIGNIFICANCE........................................... 13

1.5.1 Scientific significance................................................................................... 13

1.5.2 Practical significance ................................................................................... 14

1.6 RESEARCH GAP ................................................................................................ 14

1.7 RESEARCH METHODS..................................................................................... 14

1.8 CONTENT OF THESIS....................................................................................... 15

CONCLUSION CHAPTER 1 ....................................................................................... 17

CHAPTER 2: LITERATURE ....................................................................................... 18

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2.1. OVERVIEW OF CREDIT RISK OF JOINT STOCK COMMERCIAL BANKS

............................................................................................................................................. 18

2.1.1. Definition of credit risk .............................................................................. 18

2.1.2. The indicators reflect the credit risk of commercial banks:................... 19

2.2. FACTORS AFFECTING THE CREDIT RISK OF JOINT STOCK

COMMERCIAL BANKS ................................................................................................... 22

2.2.1. Macro factor ................................................................................................ 22

2.2.2. Bank specific................................................................................................ 24

2.3. Overview of the studies to the thesis................................................................... 26

2.3.1. Domestic studies.......................................................................................... 26

2.3.2. Forgein studies ............................................................................................ 27

CONCLUSION CHAPTER 2 ....................................................................................... 31

CHAPTER 3: RESEARCH METHODS....................................................................... 32

3.1. DATA COLLECTION:....................................................................................... 32

3.2. RESEARCH MODELS....................................................................................... 33

3.3. DESCRIPTION VARIABLE AND RESEARCH HYPOTHESIS..................... 34

3.3.1. Dependent variable ..................................................................................... 34

3.3.2. Independent variables ................................................................................ 35

3.4. RESEARCH PROCESS...................................................................................... 42

3.5 RESEARCH METHODS..................................................................................... 44

3.5.1. Ordinary Least Squares (OLS).................................................................. 44

3.5.2. Fixed Effect Model (FEM) ......................................................................... 44

3.5.3. Random Effect Model (REM).................................................................... 44

3.5.4. Feasible Generalized Least Square (FGLS)............................................. 44

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3.5.5. System Generalized Model of Moments (S-GMM) ................................. 45

3.5.6. Check for suitable model selection ............................................................ 45

CONCLUSION CHAPTER 3 ....................................................................................... 48

CHAPTER 4: RESEARCH RESULTS AND DISCUSSION ...................................... 49

4.1 DESCRIPTIVE STATISTICAL.......................................................................... 49

4.2 CORRELATION ANALYSIS............................................................................. 51

4.3. MULTICOLLINEARITY TEST ........................................................................ 52

4.4 ESTIMATED THE POOLED OLS, FEM, REM MODELS.............................. 53

4.5 SELECTION TEST OF 3 MODELS POOLED OLS AND FEM....................... 55

4.6 ESTIMATED THE FGLS.................................................................................... 56

4.7 ESTIMATING THE REGRESSION MODEL BY GMM .................................. 57

4.8 DISCUSSION ...................................................................................................... 58

4.8.1 Bank size (SIZE) .......................................................................................... 60

4.8.2 Non-performing loan (NPL)........................................................................ 61

4.8.3 Ratio of Profitability (ROA) ....................................................................... 62

4.8.4 Ratio of capital (CAP) ................................................................................. 63

CONCLUSION OF CHAPTER 4 ................................................................................. 65

CONCLUSIONS AND RECOMMENDATIONS........................................................ 66

5.1. CONCLUSION ................................................................................................... 66

5.2. RECOMENDATION .......................................................................................... 67

5.3. LIMITATIONS OF THE TOPIC AND RESEARCH DIRECTIONS ............... 68

5.3.1. Limitations of the research ........................................................................ 68

5.3.2. Further research directions ....................................................................... 68