The Impact Of Liquidity Management On Profitability - Evidence From Commercial Banks In Viet Nam

Abstract

This study aims to explore the impact of liquidity management on the profitability of commercial banks in Vietnam during the period 2012-2023. The research sample includes 27 commercial banks, representing the entire Vietnamese commercial banking system. The liquidity ratios used in the study include investment ratio, quick ratio, capital adequacy ratio, net credit facilities/total assets and current assets ratio. Profitability is measured by return on equity (ROE) and return on assets (ROA). The study applies quantitative methods and uses estimation techniques such as OLS, FEM, REM and GLS on panel data to test the regression model. Experimental results show that increasing the capital adequacy ratio and investment ratio has a positive impact on bank profitability. On the contrary, quick ratio and current assets ratio negatively affect profits. From these results, the study recommends that banks should optimize the use of existing liquidity in investments to increase profits. At the same time, banks need to apply a unified liquidity management framework to ensure sufficient liquidity is maintained for effective operations. In addition, banks should also conduct analysis on liquidity growth rate and the ability to balance capital sources and capital usage