The Impact of Income Diversification on Bankruptcy Risk of Vietnamese Commercial Banks

Abstract

The main objective of this study is to analyze the impact of income diversification on the bankruptcy risk of Vietnamese commercial banks, in which the income diversification variable is measured through the HHI index (The Herfindahl-Hirschman Index) and the bankruptcy risk variable is measured through the Z-Score. We applied the generalized method of moments (GMM) with data collected from 28 Vietnamese commercial banks from 2011 to 2020. The result shows that income diversification does not affect bankruptcy risk in Vietnamese commercial banks. Instead, the results show that the bank bankruptcy risk is mainly influenced by other factors belonging to the bank's characteristics, such as the bank's bankruptcy risk of the previous year, capital adequacy, cost-to-income ratio, bank size, and asset growth.