Determinants of Net Interest Margin: A Study of Vietnamese Commercial Banks

Abstract

With a dataset of 25 banks in the Vietnamese joint stock commercial banking system for the period 2012 - 2021, the author conducts a study on the factors affecting the rate of interest margin of these banks. The applied models are pooled regression model (Pooled OLS), fixed effects regression model (FEM), random effects regression model (REM) and generalized least squares model (FGLS) to overcome the defects of the model. Through empirical results, the author determines that the size of equity, capital adequacy ratio, and inflation rate have a positive impact; Cost efficiency harms the bank's financial performance. In addition, bank size, credit risk provision ratio, liquidity level, COVID epidemic, and economic growth rate are not statistically significant for the credit risk ratio. Based on our findings, the author proposes governance implications for managers to improve banks' equity ratio.