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  1. UEH Digital Repository
  2. JABES (2018 - Now) | JED (1994 - 2017)
  3. JABES in English

Effects of bank capital on profitability and credit risk: the case of Vietnam’s commercial banks

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Issue Date
2016
Author
Nguyen Thi Hong Vinh
Co-Author
Le Phan Thi Dieu Thao
Host Item
Journal of Economic Development
ISSN
1859 -1124
Metadata

Show full item record


Issue Date
2016
Author
Nguyen Thi Hong Vinh
Co-Author
Le Phan Thi Dieu Thao
Metadata

Show full item record

Metadata Views

23

Content Views

0

Abstract

This paper seeks to examine the effects of bank capital on profitability and credit risk of 30 Vietnam’s commercial banks from 2007 to 2014. Using the system generalized method of moments (GMM), the paper conducts several tests on the moral hazard and regulatory hypotheses on the relationships among bank capital, profitability, and credit risk. With no regard to other determinants, its results indicate that the effects are evident, i.e. bank risk is found to impact differently on bank returns, and it is also negatively associated with credit risk of commercial banks in Vietnam.

Keywords
Bank capital, Credit risk, Profitability, Commercial banks
URI
http://digital.lib.ueh.edu.vn/handle/UEH/55288
http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=dfb767ae-9d6e-4034-a7b2-8edc63a8381a
Publisher
Trường Đại học Kinh tế Tp. Hồ Chí Minh
DOI
http://doi.org/10.24311/jabes/2016.23.4.06
Reference
Agoraki, M., Delis, M. D., & Pasiouras, F. (2011).Regulations, competition, and bank risk-taking in transition countries. Journalof Financial Stability,7(1), 38–48.

Agusman, A., Monroe, G. S., Gasbarro, D., &Zumwalt, J. K. (2008). Accounting and capital market measures of risk: Evidencefrom Asian banks during 1998–2003. Journal of Banking and Finance,32(4), 480–488.

Akhavein, J. D., Swamy, P. V., & Taubman, S. B.(1997). A general method of deriving the efficiencies of banks from a profitfunction. Journal of Productivity Analysis,8(1), 71–93.

Altunbas, Y. S., Carbo, E., Gardener, P. M., &Molyneux, P. (2007). Examining the relationships between capital, risk, andefficiency in European banking. European Financial Management, 13(1), 49–70.

Arellano, M., & Bond, S. (1991). Some tests ofspecification for panel: Monte Carlo evidence and an application to employmentequations. Review of Economic Studies, 58, 277–297.

Arellano, M., & Bover, O. (1995). Another look atthe instrumental-variable estimation of error-components. Journal of Econometrics, 68(1),29–52.

Ayaydin, H., & Karakaya, A. (2014). The effect of bank capital on profitabilityand risk in Turkish banking. International Journal of Business and SocialScience, 5(1), 252–271.

Barth, J., Caprio, G., & Levine, R. (2008). Bankregulations are changing: For better or worse? Comparative Economic Studies, 50(4),537–563.

Berger, A. N. (1995). The relationship between capitaland earnings in banking. Journal of Money, Creditand Banking,27(2),432–456.

Berger, A. N., &DeYoung, R. (1997).Problem loans and cost efficiency in commercial banks. Journal of Bankingand Finance, 21(6), 849–870.

Berger, A. N., & Bouwman, C. H. S. (2013). Howdoes capital affect bank performance during financial crises? Journal ofFinancial Economics,109, 146–176.

BIS. (2011). Coreprinciples for effective banking supervision. Retrieved from http://www.bis.org/list/bcbs/tid_25/index.htm

Blundell, R., & Bond, S. (1998). Initialconditions and moment restrictions in dynamic panel data models. Journal ofEconometrics, 87, 115–143.

Blundell, R., & Bond, S. (2000). GMM estimationwith persistent panel data: An application to production functions. Econometric Reviews, 19(3), 321–340.

Casu, B., & Girardone, C. (2006). Bankcompetition, concentration, and efficiency in the single European market. The Manchester School, 74(4), 441–468.

Demirgüç-Kunt, A., & Huizinga, H. (2000). Financial structure and bank profitability.World Bank Policy Research Working Paper No. 2430. Washington, DC: The World Bank.

Doytch, N., & Uctum, M.(2011). Does the worldwide shift of FDI from manufacturing to servicesaccelerate economic growth? A GMM estimation study. Journal of International Money and Finance, 30(3), 410–427.

Driffill, J., Psaradakis, Z.,& Sola, M. (1998). Testing the expectations hypothesis of the termstructure using instrumental variables. InternationalJournal of Finance and Economics, 3(4),321–325.

Festic, M., Kavkler, A., &Repina, S. (2011). The macroeconomic sources of systemic risk in the bankingsectors of five new EU member states. Journalof Banking and Finance, 35(2),310–322.

Fofack, H. (2005). Non-performing loans in Sub-SaharanAfrica: Causal analysis and macroeconomic implications. World BankPolicy Research Working Paper No. 3769. Washington, DC: The World Bank.

Goddard, J., Molyneux, P., & Wilson, J. O. S.(2004). The profitability of European banks: A cross-sectional and dynamicpanel analysis. Manchester School, 72(3),363–381.

Goddard, J., Molyneux, P., Wilson, J. O. S., &Liu, H. (2013). Do bank profits converge? EuropeanFinancial Management, 19(2),345–365. doi: 10.1111/j.1468-036X.2010.00578.x

Heggestad, A. A. (1977). The competitive condition ofUS banking markets and the impact of structural reform. Journal of Finance,32(4), 649–661.

Iannotta, G., Nocera, G., & Sironi, A. (2007).Ownership structure, risk, and performance in the European banking industry. Journalof Banking and Finance, 31(7),2127–2149.

Jacques, K., & Nigro, P. (1997). Risk-basedcapital, portfolio risk, and bank capital: A simultaneous equations approach. Journalof Economics and Business, 49(6),533–547.

Jorion, P. (2009). Financial risk manager handbook. NY:John Wiley & Sons.

Keeton, R., & Morris, S.(1987). Whydo banks’ loan losses differ? Federal Reserve Bank of Kansas City EconomicReview, 72(5), 3–21.

Lee, C. C., & Hsieh, M. F. (2013). The impact ofbank capital on profitability and risk in Asian Banking. Journal of International Moneyand Finance, 32, 251–281.

Louzis, D., Vouldis, A., & Metaxas, V. (2010). Macroeconomic and bank-specific determinantsof non-performing loans in Greece: A comparative study of mortgage, business,and consumer loan portfolios. Bankof Greece Working Paper No. 118. Athens, Greece: Bank of Greece.

Mishkin, F. (2010). The economics of money banking, and financial markets. NY: Pearson.

Naceur, S. B., & Omran, M. (2011). The effects ofbank regulations, competition, and financial reforms on banks’ performance. EmergingMarkets Review, 12(1), 1–20.

Pettway, R. H. (1976). Market tests of capitaladequacy of large commercial banks. Journal of Finance, 31(3), 865–875.

Rime, B. (2001). Capital requirements and bankbehavior: Empirical evidence for Switzerland. Journal of Banking and Finance,25(4), 789–805.

Salas, V., & Saurina, J. (2002). Credit risk intwo institutional regimes: Spanish commercial and savings banks. Journal of Financial Services Research,22(3), 203–224.

Shrieves, R. E., & Dahl, D. (1992). Therelationship between risk and capital in commercial banks. Journal ofBanking and Finance, 16(2),439–457.

Short, B. (1979). The relation between commercial bankprofit rates and banking concentration in Canada, Western Europe, and Japan. Journalof Banking and Finance, 3(4),209–219.

Agoraki, M., Delis, M. D., & Pasiouras, F. (2011).Regulations, competition, and bank risk-taking in transition countries. Journalof Financial Stability,7(1), 38–48.

Agusman, A., Monroe, G. S., Gasbarro, D., &Zumwalt, J. K. (2008). Accounting and capital market measures of risk: Evidencefrom Asian banks during 1998–2003. Journal of Banking and Finance,32(4), 480–488.

Akhavein, J. D., Swamy, P. V., & Taubman, S. B.(1997). A general method of deriving the efficiencies of banks from a profitfunction. Journal of Productivity Analysis,8(1), 71–93.

Altunbas, Y. S., Carbo, E.,...See More
Appears in Collections:JABES in English
There are no files associated with this item.



Effects of bank capital on profitability and credit risk: the case of Vietnam’s commercial banks

TweetLikeShare# Shares: 0

Metadata Views

23

Content Views

0

Issue Date
2016
Author
Nguyen Thi Hong Vinh
Co-Author
Le Phan Thi Dieu Thao
Host Item
Journal of Economic Development
ISSN
1859 -1124
Metadata

Show full item record


Issue Date
2016
Author
Nguyen Thi Hong Vinh
Co-Author
Le Phan Thi Dieu Thao
Metadata

Show full item record

Metadata Views

23

Content Views

0

Abstract

This paper seeks to examine the effects of bank capital on profitability and credit risk of 30 Vietnam’s commercial banks from 2007 to 2014. Using the system generalized method of moments (GMM), the paper conducts several tests on the moral hazard and regulatory hypotheses on the relationships among bank capital, profitability, and credit risk. With no regard to other determinants, its results indicate that the effects are evident, i.e. bank risk is found to impact differently on bank returns, and it is also negatively associated with credit risk of commercial banks in Vietnam.

Keywords
Bank capital, Credit risk, Profitability, Commercial banks
URI
http://digital.lib.ueh.edu.vn/handle/UEH/55288
http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=dfb767ae-9d6e-4034-a7b2-8edc63a8381a
Publisher
Trường Đại học Kinh tế Tp. Hồ Chí Minh
DOI
http://doi.org/10.24311/jabes/2016.23.4.06
Reference
Agoraki, M., Delis, M. D., & Pasiouras, F. (2011).Regulations, competition, and bank risk-taking in transition countries. Journalof Financial Stability,7(1), 38–48.

Agusman, A., Monroe, G. S., Gasbarro, D., &Zumwalt, J. K. (2008). Accounting and capital market measures of risk: Evidencefrom Asian banks during 1998–2003. Journal of Banking and Finance,32(4), 480–488.

Akhavein, J. D., Swamy, P. V., & Taubman, S. B.(1997). A general method of deriving the efficiencies of banks from a profitfunction. Journal of Productivity Analysis,8(1), 71–93.

Altunbas, Y. S., Carbo, E., Gardener, P. M., &Molyneux, P. (2007). Examining the relationships between capital, risk, andefficiency in European banking. European Financial Management, 13(1), 49–70.

Arellano, M., & Bond, S. (1991). Some tests ofspecification for panel: Monte Carlo evidence and an application to employmentequations. Review of Economic Studies, 58, 277–297.

Arellano, M., & Bover, O. (1995). Another look atthe instrumental-variable estimation of error-components. Journal of Econometrics, 68(1),29–52.

Ayaydin, H., & Karakaya, A. (2014). The effect of bank capital on profitabilityand risk in Turkish banking. International Journal of Business and SocialScience, 5(1), 252–271.

Barth, J., Caprio, G., & Levine, R. (2008). Bankregulations are changing: For better or worse? Comparative Economic Studies, 50(4),537–563.

Berger, A. N. (1995). The relationship between capitaland earnings in banking. Journal of Money, Creditand Banking,27(2),432–456.

Berger, A. N., &DeYoung, R. (1997).Problem loans and cost efficiency in commercial banks. Journal of Bankingand Finance, 21(6), 849–870.

Berger, A. N., & Bouwman, C. H. S. (2013). Howdoes capital affect bank performance during financial crises? Journal ofFinancial Economics,109, 146–176.

BIS. (2011). Coreprinciples for effective banking supervision. Retrieved from http://www.bis.org/list/bcbs/tid_25/index.htm

Blundell, R., & Bond, S. (1998). Initialconditions and moment restrictions in dynamic panel data models. Journal ofEconometrics, 87, 115–143.

Blundell, R., & Bond, S. (2000). GMM estimationwith persistent panel data: An application to production functions. Econometric Reviews, 19(3), 321–340.

Casu, B., & Girardone, C. (2006). Bankcompetition, concentration, and efficiency in the single European market. The Manchester School, 74(4), 441–468.

Demirgüç-Kunt, A., & Huizinga, H. (2000). Financial structure and bank profitability.World Bank Policy Research Working Paper No. 2430. Washington, DC: The World Bank.

Doytch, N., & Uctum, M.(2011). Does the worldwide shift of FDI from manufacturing to servicesaccelerate economic growth? A GMM estimation study. Journal of International Money and Finance, 30(3), 410–427.

Driffill, J., Psaradakis, Z.,& Sola, M. (1998). Testing the expectations hypothesis of the termstructure using instrumental variables. InternationalJournal of Finance and Economics, 3(4),321–325.

Festic, M., Kavkler, A., &Repina, S. (2011). The macroeconomic sources of systemic risk in the bankingsectors of five new EU member states. Journalof Banking and Finance, 35(2),310–322.

Fofack, H. (2005). Non-performing loans in Sub-SaharanAfrica: Causal analysis and macroeconomic implications. World BankPolicy Research Working Paper No. 3769. Washington, DC: The World Bank.

Goddard, J., Molyneux, P., & Wilson, J. O. S.(2004). The profitability of European banks: A cross-sectional and dynamicpanel analysis. Manchester School, 72(3),363–381.

Goddard, J., Molyneux, P., Wilson, J. O. S., &Liu, H. (2013). Do bank profits converge? EuropeanFinancial Management, 19(2),345–365. doi: 10.1111/j.1468-036X.2010.00578.x

Heggestad, A. A. (1977). The competitive condition ofUS banking markets and the impact of structural reform. Journal of Finance,32(4), 649–661.

Iannotta, G., Nocera, G., & Sironi, A. (2007).Ownership structure, risk, and performance in the European banking industry. Journalof Banking and Finance, 31(7),2127–2149.

Jacques, K., & Nigro, P. (1997). Risk-basedcapital, portfolio risk, and bank capital: A simultaneous equations approach. Journalof Economics and Business, 49(6),533–547.

Jorion, P. (2009). Financial risk manager handbook. NY:John Wiley & Sons.

Keeton, R., & Morris, S.(1987). Whydo banks’ loan losses differ? Federal Reserve Bank of Kansas City EconomicReview, 72(5), 3–21.

Lee, C. C., & Hsieh, M. F. (2013). The impact ofbank capital on profitability and risk in Asian Banking. Journal of International Moneyand Finance, 32, 251–281.

Louzis, D., Vouldis, A., & Metaxas, V. (2010). Macroeconomic and bank-specific determinantsof non-performing loans in Greece: A comparative study of mortgage, business,and consumer loan portfolios. Bankof Greece Working Paper No. 118. Athens, Greece: Bank of Greece.

Mishkin, F. (2010). The economics of money banking, and financial markets. NY: Pearson.

Naceur, S. B., & Omran, M. (2011). The effects ofbank regulations, competition, and financial reforms on banks’ performance. EmergingMarkets Review, 12(1), 1–20.

Pettway, R. H. (1976). Market tests of capitaladequacy of large commercial banks. Journal of Finance, 31(3), 865–875.

Rime, B. (2001). Capital requirements and bankbehavior: Empirical evidence for Switzerland. Journal of Banking and Finance,25(4), 789–805.

Salas, V., & Saurina, J. (2002). Credit risk intwo institutional regimes: Spanish commercial and savings banks. Journal of Financial Services Research,22(3), 203–224.

Shrieves, R. E., & Dahl, D. (1992). Therelationship between risk and capital in commercial banks. Journal ofBanking and Finance, 16(2),439–457.

Short, B. (1979). The relation between commercial bankprofit rates and banking concentration in Canada, Western Europe, and Japan. Journalof Banking and Finance, 3(4),209–219.

Agoraki, M., Delis, M. D., & Pasiouras, F. (2011).Regulations, competition, and bank risk-taking in transition countries. Journalof Financial Stability,7(1), 38–48.

Agusman, A., Monroe, G. S., Gasbarro, D., &Zumwalt, J. K. (2008). Accounting and capital market measures of risk: Evidencefrom Asian banks during 1998–2003. Journal of Banking and Finance,32(4), 480–488.

Akhavein, J. D., Swamy, P. V., & Taubman, S. B.(1997). A general method of deriving the efficiencies of banks from a profitfunction. Journal of Productivity Analysis,8(1), 71–93.

Altunbas, Y. S., Carbo, E.,...See More
Appears in Collections:JABES in English
There are no files associated with this item.



Citation

APA    Vinh, N. T. H. (2016). Effects of bank capital on profitability and credit risk: the case of Vietnam’s commercial banks. (Journal Article). http://digital.lib.ueh.edu.vn/handle/UEH/55288
   
MLA    Nguyen Thi Hong Vinh. Effects of bank capital on profitability and credit risk: the case of Vietnam’s commercial banks. 2016. Trường Đại học Kinh tế Tp. Hồ Chí Minh. Journal Article. http://digital.lib.ueh.edu.vn/handle/UEH/55288
   
Chicago    Nguyen Thi Hong Vinh. "Effects of bank capital on profitability and credit risk: the case of Vietnam’s commercial banks. "(Journal Article, Trường Đại học Kinh tế Tp. Hồ Chí Minh, 2016)
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