Factors affecting non-performing loans of commercial banks in developing countries: Case studies of Vietnam

Abstract

This article studies the factors affecting non-performing loans (NPLs) of Vietnamese commercial banks in the period from 2008 to 2022 through the analysis of data from 22 currently operating banks to test the impact of bank-specific and macroeconomic factors on the NPL ratio. Based on theory and previous empirical research on factors affecting NPLs, combined with the use of the GMM methodology, the authors developed a model with 11 variables affecting NPLs. The final estimation model is efficient because the errors have been checked and corrected, so there are no shortcomings in the model. The study's findings have led the authors to suggest a number of appropriate measures that would support NPL management and control, boost business effectiveness and eliminate potential future causes that could have an impact on the NPL ratio of Vietnamese commercial banks.