Factors influencing the liquidity of commercial banks in Vietnam, 2022

THE STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH UNIVERSITY OF

BANKING

HOANG DANG KHAI

FACTORS INFLUENCING THE LIQUIDITY OF

COMMERCIAL BANKS IN VIETNAM

GRADUATION THESIS

MAJOR: BANKING AND FINANCE

CODE: 7340201

SUPERVISOR: DR. NGUYEN DUY LINH

HO CHI MINH CITY – 2022

THE STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH UNIVERSITY OF

BANKING

HOANG DANG KHAI

STUDENT CODE: 050606180154

HQ6-GE04

FACTORS INFLUENCING THE LIQUIDITY OF

COMMERCIAL BANKS IN VIETNAM

GRADUATION THESIS

MAJOR: BANKING AND FINANCE

CODE: 7340201

SUPERVISOR: DR. NGUYEN DUY LINH

HO CHI MINH CITY – 2022

ABSTRACT

The topic " FACTORS INFLUENCING THE LIQUIDITY OF COMMERCIAL

BANKS IN VIETNAM" is based on previous researches related to factors affecting the

liquidity of Vietnamese commercial banks; The scope of the study is 25 Vietnamese

commercial banks in the period 2012-2021. Besides, research data is secondary data

collected from audited consolidated financial statements of commercial banks, General

Statistics Office and World Bank.

The topic uses a univariate regression model with the dependent variable being

bank liquidity and the independent variables being Bank size (SIZE), Equity ratio

(CAP), Loan-to-deposit ratio (LDR), Return on equity (ROE), Non-performing loan

(NPL), Economic growth (GDP), Inflation rate (INF). Through the regression models

Pooled-OLS, FEM, REM, FGLS, along with some tests to find a complete model and

have statistical significance. The model estimation results show that the variables LDR,

NPL, and GDP have a negative impact on the liquidity of the bank; in contrast, the

variables SIZE, CAP, ROE, and INF have a positive impact on the liquidity of banks.

However, only variables such as LDR, ROE, and INF are statistically significant.

Based on the research results, the study contributes to providing suggestions and

policy implications for bank administrators to both manage the liquidity of Vietnamese

banks and meet both profitability.

TABLE OF CONTENTS

ABSTRACT ......................................................................................................................

TABLE OF CONTENTS ..................................................................................................

DECLARATION OF AUTHENTICITY..........................................................................

ACKNOWLEDGEMENT.................................................................................................

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

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

LIST OF GRAPHS............................................................................................................

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

1.1 INTRODUCTION .................................................................................................... 1

1.2 THE NOVELTY OF THE TOPIC ................................................................................ 3

1.3 THE AIM OF THE THESIS ....................................................................................... 3

1.3.1 Overall objectives........................................................................................ 3

1.3.2 Particular objectives .................................................................................... 3

1.4 THE RESEARCH QUESTIONS.................................................................................. 4

1.5 SUBJECT AND SCOPE OF THE RESEARCH............................................................... 4

1.6 METHODOLOGY ................................................................................................... 4

1.7 RESEARCH CONTENT............................................................................................ 5

1.8 CONTRIBUTION OF THE THESIS............................................................................. 5

1.9 THE PROPOSED LAYOUT OF THE THESIS ............................................................... 5

SUMMARY OF CHAPTER 1 ........................................................................................ 7

CHAPTER 2: THEORETICAL FRAMEWORK .......................................................... 8

2.1 LIQUIDITY OF COMMERCIAL BANKS..................................................................... 8

2.1.1 Liquidity concept......................................................................................... 8

2.1.2 Bank liquidity .............................................................................................. 8

2.1.3 Supply and demand of liquidity and net liquidity position ......................... 9

2.2 LIQUIDITY MEASUREMENT METHOD .................................................................. 11

2.2.1 Liquidity gap measurement method .......................................................... 11

2.2.2 Liquidity ratio measurement method ........................................................ 12

2.3 FACTORS INFLUENCING BANK LIQUIDITY .......................................................... 13

2.3.1 Group of factors inside the bank ............................................................... 13

2.3.2 Group of factors outside the bank ............................................................. 15

2.4 EMPIRICAL RESEARCH OVERVIEW ..................................................................... 16

2.4.1 Foreign research ........................................................................................ 16

2.4.2 Domestic research ..................................................................................... 18

2.4.3 The research gaps...................................................................................... 19

SUMMARY OF CHAPTER 2 ...................................................................................... 20

CHAPTER 3: RESEARCH MODEL............................................................................ 21

3.1 ANALYSIS PROCESS............................................................................................ 21

3.2 SAMPLES AND RESEARCH DATA......................................................................... 23

3.2.1 Research samples....................................................................................... 23

3.2.2 Research data............................................................................................. 23

3.2.3 Research tools............................................................................................ 23

3.3 METHODOLOGY ................................................................................................. 24

3.3.1 Qualitative method .................................................................................... 24

3.3.2 Quantitative method .................................................................................. 24

3.4 RESEARCH MODEL AND HYPOTHESIS ................................................................. 25

3.4.1 Research model ......................................................................................... 25

3.4.2 Description of variables and hypotheses................................................... 26

SUMMARY OF CHAPTER 3 ...................................................................................... 30

CHAPTER 4: RESEARCH RESULTS......................................................................... 31

4.1 DESCRIPTIVE STATISTICS ................................................................................... 31

4.2 RESEARCH RESULTS........................................................................................... 33

4.2.1 Correlation analysis................................................................................... 33

4.2.2 Multicollinearity test ................................................................................. 35

4.3 REGRESSION RESULTS OF THE RESEARCH MODEL.............................................. 36

4.3.1 Comparison of regression results between two models, Pooled OLS and

FEM 37

4.3.2 Comparison of regression results between two models, FEM and REM.. 37

4.3.3 Defect tests ................................................................................................ 38

4.3.4 Final model................................................................................................ 39

4.4 SUMMARY .......................................................................................................... 40

4.4.1 Bank size (SIZE) ....................................................................................... 40

4.4.2 Equity ratio (CAP)..................................................................................... 41

4.4.3 Loan-to-deposit ratio (LDR) ..................................................................... 41

4.4.4 Return on equity (ROE)............................................................................. 42

4.4.5 Non-performing loan ratio (NPL) ............................................................. 42

4.4.6 Economic growth rate (GDP).................................................................... 42

4.4.7 Inflation rate (INF) .................................................................................... 43

SUMMARY OF CHAPTER 4 ...................................................................................... 44

CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS ............................... 45

5.1 CONCLUSION...................................................................................................... 45

5.2 POLICY IMPLICATIONS ....................................................................................... 46

5.2.1 For commercial banks ............................................................................... 46

5.2.2 For the State Bank of Vietnam.................................................................. 47

5.3 LIMITATIONS OF THE THESIS .............................................................................. 48

5.4 PROPOSING DIRECTIONS FOR FURTHER RESEARCH ............................................ 49

SUMMARY OF CHAPTER 5 ...................................................................................... 50

REFERENCES .............................................................................................................. 51

APPENDIX ................................................................................................................... 53

APPENDIX A. LIST OF COMMERCIAL BANKS IN VIETNAM IN THE RESEARCH SAMPLE.

................................................................................................................................... 53

APPENDIX B CALCULATED DATASET......................................................................... 55

APPENDIX C REGRESSION RESULTS WITH STATA 16.0 .............................................. 69

DECLARATION OF AUTHENTICITY

I declare that this is my independent thesis. The data used in the thesis are of clear

origin and published following the law. The research results in the thesis are my

research and analysis, honestly, objectively, and by following the reality of Vietnam.

These results have not been published in any previous papers.

Ho Chi Minh City, November 2022

The Author

Hoang Dang Khai

ACKNOWLEDGEMENT

Firstly, I would like to send my profound gratitude to all the lecturers at Banking

university, in the Office of Academic Affairs, and especially to the Department of

Finance and the Department of Banking lecturer while studying for a bachelor’s degree

at the Ho Chi Minh University of Banking

Secondly, I would like to express my sincerest and most profound thankfulness to

Dr. Nguyen Duy Linh for his guidance and patience in giving me valuable

recommendations during my study period. I am happy and fortunate to carry out this

study under his supervisor.

Lastly, I would like to thank my family for their support during my study and life.

Without encouragement and sacrifice, I would not have finished this thesis, so I

express my special love and gratitude to them.

In the implementation process, mistakes are inevitable despite consulting,

exchanging, and absorbing suggestions from teachers and friends. With the effort to

improve more and more, I look forward to receiving valuable advice from teachers and

friends.

I sincerely thank!