Effects of internal factors on onperforming loans of Vietnam’s commercial banks

Abstract

This paper employs dynamic panel data to assess the effects of bank-specific factors on nonperforming loans (NPLs) of Vietnam’s commercial banks between 2004 and 2014. Using two-step GMM estimator besides other macro variables, we find that the nonperforming loans are affected by various factors, including management quality and moral hazard along with their negative impacts. The results are consistent with previous theoretical suggestions. Particularly, ownership concentration reveals opposite results to the proposed theories, and no evidence can be found on the hypothesis that diversification of banking activities may reduce the level of nonperforming loans.