Determinants of non-performing loans : A comparative study between state-owned commercial banks and joint stock commercial banks in VietNam
Abstract
The thesis is conducted to investigate the bank-specific determinants of
non-performing loans (NPLs) in Vietnamese commercial banks. A set of control
variables comprising GDP, lending interest rates and unemployment rates are used to
control for macroeconomic environment. It further examines these impacts on NPLs
across two types of bank, state-owned commercial banks and joint stock commercial
banks. Due to different characteristics and structures, bank-specific and
macroeconomic variables may impact NPLs of each type of bank in a different way.
The sample consists of 6 state-owned commercial banks and 30 joint stock
commercial banks in Vietnam, data are collected in an eight-year period from 2005 to
2012. A fixed effect regression method is used to examine determinants of NPLs.
Particularly, it provides coefficients for non-performing loan ratios and bank’s capital
level, inefficiency level, bank performance, bank size and government ownership to
examine how these bank-specific variables determine non-performing loans.
The empirical results show that all bank-specific characteristics have
significant effect on NPLs, except for bank size since its significance level exceeds
10%. The results for inefficiency level, bank performance and government ownership
are consistent with prior studies of Berger and DeYoung (1997), Podpiera and Weill
(2008) and Louzis et al. (2010). However, it reveals a contradictory finding on bank’s
capital level suggesting that low capital level has a positive effect on NPLs, rather
than a negative effect on NPLs as Salas and Saurina (2002) and Godleswki (2004)
have tested. Moreover, the differences in the impact of bank-specific determinants
among bank types are evident, with opposing relationships between NPLs, bank size
and bank capital across SOCBs and SJCBs.