Determinants of credit risk: The case of 24 commercial banks in Vietnam

Abstract

Topic: “Determinants of Credit Risk: The Case of 24 Commercial Banks in VietNam" The research aims to analyze the factors affecting credit risk in Vietnamese commercial banks, comprising 24 banks from 2009 to 2021. The factors include credit risk in previous year, loan growth, bank size, return on assets, capital adequacy ratio, unemployment rate, GDP growth rate, inflation, real estate prices index, and new institutional factors such as law compliance index and corruption control index. Variables with a positive impact on credit risk include credit risk in previous year, the inflation rate, and the unemployment rate, return on assets, and capital adequacy ratio. Conversely, variables with a negative impact on credit risk are GDP growth rate, loan growth, and real estate price index. Two variables, bank size and legal compliance exhibit directional impact on credit risk depending on the measurement approach. Ultimately, corruption control index shows no statistical significance in influencing credit risk. Based on theoretical studies in developed and developing countries, along with some studies in Vietnam, the authors have constructed a model and hypothesis to identify new factors influencing credit risk in 24 Vietnamese commercial banks from 2009 to 2021. Using a sample of 312 observations, the authors employ econometric methods to analyze and synthesize the impact of these factors on credit risk in the Vietnamese commercial banking system. This analysis will lead to conclusions and recommendations for commercial banks, the State Bank, the Government, and relevant agencies to minimize credit risk and propose measures to enhance profitability and maintain stability in the sustainable economic development of the Vietnamese commercial banking system.