The impact of state ownership concentration on capital adequacy ratio in Vietnamese commercial banks: A Bayesian approach

Abstract

Amid the global trend toward adopting Basel III capital adequacy standards and in light of the Vietnamese government's divestment policy, this study investigates the impact of state ownership concentration on the Capital Adequacy Ratio (CAR) of commercial banks in Viet Nam. A Bayesian probabilistic regression model is employed using a selected sample of 26 Vietnamese commercial banks during the period from 2014 to 2023. The empirical findings indicate that state ownership levels at or above the 10% threshold harm CAR. The study suggests that relevant regulatory authorities should look at and change the legal regulations about how state capital is managed so state-owned commercial banks can keep enough capital while having more freedom in how they operate and are governed. Additionally, commercial banks are advised to manage prior-year CAR effectively, improve cost management efficiency, and optimize the interaction between financial leverage and concentrated state ownership to strengthen CAR oversight and stability.