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The determinants of liquidity risk of commercial banks in Vietnam, 2021
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Mô tả chi tiết
MINISTRY OF EDUCATION STATE BANK OF VIETNAM
BANKING UNIVERSITY OF HO CHI MINH CITY
-------------------------
DUONG HA MY
THE DETERMINANTS OF LIQUIDITY RISK OF
COMMERCIAL BANKS IN VIETNAM
GRADUATE THESIS
BANKING AND FINANCE
MAJOR ID: 7340201
ADVISOR
PH.D. NGUYEN DUY LINH
Ho Chi Minh City, September 2021
MINISTER OF EDUCATION STATE BANK OF VIETNAM
BANKING UNIVERSITY OF HO CHI MINH CITY
-------------------------
DUONG HA MY
THE DETERMINANTS OF LIQUIDITY RISK OF
COMMERCIAL BANKS IN VIETNAM
GRADUATE THESIS
BANKING AND FINANCE
MAJOR ID: 7340201
ADVISOR
PH.D. NGUYEN DUY LINH
Ho Chi Minh City, September 2021
i
ABSTRACT SUMMARY
The topic name: The determinants of liquidity risk of commercial banks in
Vietnam.
The main goals of the study are to find out factors that can explain the liquidity
risk in Vietnamese commercial banks and evaluate their influence levels on the risk.
After that, several policy implications and recommendations will be proposed to
enhance the liquidity ability of banks and prevent sudden liquidity shock.
The study’s contents include: Firstly, the appearance of the study comes from
the demand in limiting the risk of liquidity in commercial banks in the context of
intense competition among banks. Secondly, the study makes a review of previous
domestic and foreign research determining factors affecting liquidity risk to consider
them as a theoretical basis and inherit the research models. Thirdly, the source of
research data is collected from the financial reports of 25 commercial banks in
Vietnam during the period from 2010-2020. Fourthly, the author uses plenty of
methods from qualitative (description, comparison, analysis...) to quantitative
methods. Particularly, the panel data in research is regressed by implementing Pooled
OLS, FEM, REM, and FGLS models. Finally, based on research results, the analysis,
comments as well as conclusion are all demonstrated, to propose the author’s
suggestions in staving off the liquidity risk in banks’ process of operation.
The author hopes that this study can be a partial contribution to the research
in the future as a reference and the research results are somehow useful to bank
administrators, policymakers, and other scholars.
ii
DISCLOSURE
This study has never been submitted to any university for the completion of a
graduate thesis. Except for the fully referenced citations in this thesis, this thesis is
the author's original research effort, the research results are honest, and there are no
contents previously published or created by others.
I take full responsibility for this statement.
Ho Chi Minh City, September 2021
The thesis’s author
Duong Ha My
iii
ACKNOWLEDGMENTS
The author would like to express a vote of thanks to all the teachers of Banking
University of Ho Chi Minh City for supporting, helping, and directly educating and
imparting scientific knowledge specialized in Finance – Banking major, which is the
foundation for the author to accomplish this thesis and apply it in practice. Especially,
I sincerely appreciate the scientific orientation role of a Ph.D. Nguyen Duy Linh in
guiding, supporting, and commenting for my research paper on the topic “The
determinants of liquidity risk of commercial banks in Vietnam”.
I also would like to show my thankfulness to my family and friends for always
supporting me, believing in me, and being the encouragement for me to complete this
thesis.
Due to the limitations in experience and knowledge of the author, the
shortcomings are inevitable. I am looking forward to receiving comments and advice
from the teachers.
Sincerely thanks.
Ho Chi Minh City, September 2021
The thesis’s author
Duong Ha My
iv
COMMENTS OF ADVISOR
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Ho Chi Minh City, September 2021
ADVISOR
Ph.D. Nguyen Duy Linh
v
CONTENTS
CHAPTER 1: INTRODUCTION ...........................................................................1
1.1. Introduction ...................................................................................................1
1.2. Objectives of the study ..................................................................................2
1.2.1. General objectives...............................................................................2
1.2.2. Particular objectives............................................................................2
1.3. Research questions ........................................................................................2
1.4. Research’s subject and range.........................................................................2
1.4.1. Research’s subject ...............................................................................2
1.4.2. Research’s range..................................................................................3
1.5. Scientific and practical significance..............................................................3
1.6. Research methodology ..................................................................................3
1.6.1. Research model ...................................................................................3
1.6.2. Research methodology ........................................................................5
1.6.3. Research process .................................................................................6
1.6.4. Data collecting and analyzing .............................................................7
1.7. Research content............................................................................................7
CHAPTER 2: LITERATURE REVIEW ..............................................................10
2.1. Theoretical foundations of bank liquidity ...................................................10
2.1.1. The definition of bank liquidity ........................................................10
2.1.2. Supply and demand of liquidity ........................................................10
2.1.2.1. Supply of liquidity .........................................................................10
2.1.2.2. Demand of liquidity.......................................................................11
2.1.2.3. Net liquidity status.........................................................................12
2.2. Theoretical foundations of liquidity risk .....................................................13
2.2.1. Definitions of liquidity risk ...............................................................13
2.2.2. Causes of liquidity risk......................................................................13
2.2.3. Liquidity risk and performance of banks ..........................................14
2.2.4. Liquidity risk measures.....................................................................15
2.2.4.1. Liquidity risk ratios .......................................................................15
vi
2.2.4.2. Financing gap.................................................................................16
2.3. Literature review..........................................................................................17
2.4. Factors affecting liquidity risk.....................................................................19
2.4.1. Internal factors...................................................................................19
2.4.1.1. Return on assets (ROA)..................................................................19
2.4.1.2. Net interest margin (NIM) .............................................................20
2.4.1.3. Bank size (SIZE)............................................................................20
2.4.1.4. Equity ratio (CAP).........................................................................21
2.4.1.5. Total loans ratio (TLA) ..................................................................21
2.4.1.6. Operating expenses ratio (CEA) ....................................................21
2.4.1.7. Total deposits ratio (TDES)...........................................................21
2.4.2. External factors..................................................................................22
2.4.2.1. Inflation rate (INF) ........................................................................22
2.4.2.2. Economic growth rate (GDP)........................................................22
CHAPTER 3: RESEARCH METHOD.................................................................25
3.1. Proposing a research model.........................................................................25
3.2. Variables’ descriptions................................................................................26
3.2.1. The dependent variable – Liquidity risk measure (LIQ)...................26
3.2.2. The independent variables.................................................................26
3.2.2.1. Return on assets (ROA)..................................................................26
3.2.2.2. Net interest margin (NIM) .............................................................26
3.2.2.3. Bank size (SIZE)............................................................................27
3.2.2.4. Equity ratio (CAP).........................................................................27
3.2.2.5. Total loans ratio (TLA) ..................................................................27
3.2.2.6. Operating expenses ratio (CEA) ....................................................27
3.2.2.7. Total deposits ratio (TDES)...........................................................28
3.2.2.8. Inflation rate (INF) ........................................................................28
3.2.2.9. The economic growth rate (GDP) .................................................28
3.3. Research methodology ................................................................................30
vii
3.3.1. Research process ...............................................................................30
3.3.2. Research sample and descriptive statistics........................................32
3.3.2.1. Research sample ............................................................................32
3.3.2.2. Descriptive statistics......................................................................35
3.3.3. Research methodology ......................................................................36
3.3.3.1. Models used for panel data............................................................37
3.3.3.2. Choosing an appropriate model.....................................................38
3.3.3.3. Tests for defects of the chosen model ...........................................39
CHAPTER 4: RESEARCH RESULTS ................................................................41
4.1. Research results...........................................................................................41
4.1.1. Test of multi-collinearity...................................................................41
4.1.1.1. Correlations between variables......................................................41
4.1.1.2. VIF ratio.........................................................................................42
4.1.2. Regression results of three models: Pooled OLS, FEM, and REM ..43
4.1.3. Choosing a suitable model ................................................................44
4.1.3.1. Choosing between Pooled OLS and FEM.....................................44
4.1.3.2. Choosing between FEM and REM................................................45
4.1.4. Tests for defects of FEM model........................................................45
4.1.4.1. Test for heteroskedasticity.............................................................45
4.1.4.2. Test for autocorrelation .................................................................45
4.1.5. FGLS regression................................................................................46
4.1.6. Comparison between models ............................................................47
4.1.7. Results summary ...............................................................................48
4.2. Results discussion........................................................................................49
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS ..........................53
5.1. Research conclusion ....................................................................................53
5.2. Policy implications and recommendations for Vietnamese commercial
banks to limit the liquidity risk .............................................................................54
5.2.1. For commercial banks.......................................................................54
5.2.2. For the State bank..............................................................................55