Factors Affecting Liquidity For Commercial Banks In Vietnam

Abstract

This research aims to figure out the external and internal factors influencing the liquidity of commercial banks in Vietnam. The gross domestic product growth rate and inflation rate are examples of external influences, while bank size, capital adequacy, return on equity, cost of funding, and the ratio of total loans to total assets are examples of internal factors. This research article obtained secondary data from twenty-eight commercial banks in Vietnam from 2015 to 2022. Based on the use of a Fixed Effect model, research results from a panel data regression model show empirical findings such as the fact that only three of the six variables that make up the bank-specific factors affect liquidity in Vietnamese commercial banks. In particular, return on equity and the ratio of total loans to total assets show a positive impact on liquidity while the negative comes from capital adequacy. In addition, both gross domestic product growth rate and inflation rate variables belonging to macroeconomic factors have an impact on liquidity in Vietnamese commercial banks. While the gross domestic product growth rate can have a negative impact, the positive impact on the liquidity of Vietnamese commercial banks lies in the inflation rate.