Luận văn thạc sĩ UEH determinants of non performing loans in vietnamese banking system

UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM

HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES

VIETNAM THE NETHERLANDS

VIETNAM – THE NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF NON-PERFORMING LOANS

IN VIETNAMESE BANKING SYSTEM

BY

NGUYEN THI HONG THUONG

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, DECEMBER 2017

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF NON-PERFORMING LOANS

IN VIETNAMESE BANKING SYSTEM

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

NGUYEN THI HONG THUONG

Academic Supervisor:

A/PROF. NGUYEN VAN NGAI

HO CHI MINH CITY, DECEMBER 2017

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i

DECLARATION

I declare that the wholly and mainly contents and the work presented in this thesis

(Determinants of Non-performing loans in Vietnamese Banking System) are

conducted by myself. The work is based on my academic knowledge as well as my

review of others’ works and resources, which is always given and mentioned in the

reference lists. This thesis has not been previously submitted for any degree or

presented to any academic board and has not been published to any sources. I am

hereby responsible for this thesis, the work and the results of my own original

research.

NGUYEN THI HONG THUONG

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ii

ACKNOWLEDGEMENT

Here I would like to show my sincere expression of gratitude to thank my supervisor,

Ass. Professor Nguyen Van Ngai for his dedicated guideline, understanding and

supports during the making of this thesis. His precious academic knowledge and ideas

has motivated me for completing this thesis.

Besides, I would like to express my appreciation to the lecturers and staff of the

Vietnam – Netherlands Program at University of Economics Ho Chi Minh city for

their willingness and priceless time to assist and give me opportunity for this thesis

completion.

Next, I would like to thank all of my classmates for their encouragement and their

hard work, which become a good example for me to do the thesis. I wish all of us will

graduate at the same date.

Lastly, I would like to express my gratitude to my families, my beloved group for

their unlimited supports and encouragement. They are the motivation for me to finish

this course research project.

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iii

ABBREVIATION

FE: Fixed-effect estimator

GDP: Gross domestic product

NPLs: Non-performing loans

OLS: Ordinary Least Square

RE: Random-effect estimator

SBV: State Bank of Vietnam

S.GMM: the system generalized method of the moments estimator

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iv

ABSTRACT

Credit risk is one of the elements impact on the health of banking systems and

performance of economic activities. Non-performing loans is the general factor

presents for this bank’s credit risk. There are previous researches indicate the close

relations between bad debts and factors from macroeconomic environment and bank

specifications. This is the motivations for this paper to examine both macro and micro

variables of 30 Vietnamese banks from 2006 to 2016. This dynamic panel data is

estimated by the System Generalized Method of Moments. The regression results

support the strong evidence for the impact of macro indicators on problem loans. The

testing results are in accordance with several papers which indicated the negative

relation with economic growth and positive correlation with lending interest rate and

government debts of problem loans. However, due to the type of labor force, the

increase of unemployment rate will lead to the increase in bad loans in Vietnam. In

addition, with bank-specific factors, tests of skimping hypothesis, diversification (with

proxy is banks’ size) hypothesis and procyclical credit policy hypothesis have the

statistical significance in Vietnam.

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