The Impact of Capital Structure on Bank Performance in Vietnamese Commercial Banks

Abstract

This study examines the influence of internal and external factors on the bank performance of 31 Vietnamese commercial banks from 2012 to 2021. Using the Pooled OLS, REM, FEM, and GLS estimations for a panel model, our findings indicate that capital structure benefits bank performance. Furthermore, the study discovered a significant positive association between bank capitalization, bank size, loan ratio, and growth rate on its performance via two metrics, including the ratio of return on equity and return on total assets. In contrast, the deposit rate, gross domestic product, and inflation have negative effects. From our results, banks should consider raising equity capital to improve operational efficiency and boost financial capability.