Factors Affecting Liquidity Risk of Commercial Banks in Vietnam

Abstract

The article investigates the determinants of liquidity risk of Vietnamese commercial banks from 2011 to 2021. We use data from 26 banks with a large proportion of total assets in Vietnamese commercial banking system. The following factors were included in the research model: bank size (SIZE), return on equity (ROE), equity ratio (CAP), bad debt ratio (NPL), credit provision ratio (LLR), loan-to-deposit ratio (LDR), inflation rate (INF), and economic growth rate (GDP). By using ordinary least square (OLS), fixed-effects model (FEM) and random-effects model (REM) approaches, the results show that bank size (SIZE), equity ratio (CAP), credit risk provision ratio (LLR), loan-to-total deposit ratio (LDR), and economic growth rate (GDP) have positive relationships with bank liquidity risk. Meanwhile, return on equity (ROE), bad debt ratio (NPL), and inflation rate (INF) negatively affect bank liquidity risk.