Factors Affecting Non-Performing Loan in Vietnamese Joint-Stock Commercial Banks: The Moderating Role of Bank Size

Abstract

Using data from 26 Vietnamese joint-stock commercial banks spanning the period 2011 to 2023, this study applies foundational theories and prior research to analyze the impact of various factors on non-performing loans (NPLs). It also explores the moderating role of bank size in the relationship between specific bank characteristics and NPLs. Employing Bayesian regression methods, the study yields several noteworthy findings. First, lagged non-performing loans (NPLt−1), equity ratio (ETA), credit growth (LRG), and inflation are found to have a positive impact on NPLs. In contrast, profitability (ROE), bank size, and economic growth exert a negative influence. Moreover, the analysis confirms the moderating effect of size on the relationship between several bank-specific factors and NPLs. These findings offer valuable insights for bank managers and policymakers, highlighting the importance of size management as a strategic tool to mitigate credit risk in commercial banks.