Determinants of liquidity of commercial banks in Vietnam

Abstract

This study aims to examine bank-specific and macroeconomic factors which might affect the bank liquidity. In our study, various regression methods were utilized to test these research hypotheses including FGLS (Feasible Generalized Least Squares) on data of 20 Vietnamese commercial banks, spanning over the period from 2012 - 2022. The results show that liquidity has a positive relationship with bank size and loan-to-deposit ratio. Meanwhile, bad debt ratio and credit risk provision ratio have a negative relationship with bank liquidity. Regarding macroeconomics factors, bank liquidity is positively related to GDP growth rate, but negatively affected by inflation rate. However, there is no statistically significant effects of the ratio of equity to total assets and the ratio of net profit to equity on bank liquidity.