Applying the ordered Logit model to analyze the probability of bank failures of Vietnamese commercial banks

Abstract

This study analyzes the probability of bank failures by applying an ordered logit regression model with the dependent variable being the probability of bank failures, which is measured based on the CAMELS rating system of 22 Vietnamese commercial banks in the period 2006 - 2020. The results show that the factors affecting the probability of bank failures in Vietnamese commercial banks include non-interest income, credit risk, salary and allowance costs, liquidity risk, credit growth rate, competitiveness, and state ownership. In which, non-interest income, credit growth rate, and competitiveness are variables that have a negative impact on the probability of bank failures. In contrast, credit risk, salary and allowance costs, liquidity risk, and state ownership have a positive impact on the probability of bank failures.