Role of concentration and size in the effects of world uncertainty on Vietnamese bank credit risk
-
DOIhttp://dx.doi.org/10.21511/bbs.21(1).2026.11
-
Article InfoVolume 21 2026, Issue #1, pp. 142-152
- 16 Views
-
1 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Type of the article: Research Article
Abstract
Uncertainty is an important concern in banking risk management, as it can undermine the financial system’s shock absorption capacity and threaten overall banking stability. Utilizing a sample of 24 Vietnamese joint-stock commercial banks from 2012 to 2022 (Since 2023, several banks have undergone mergers and others have come under central bank control), this study analyzes and evaluates the impact of world uncertainty on credit risk in commercial banks. Additionally, the study analyzes the moderating effects of concentration and size on the relationship between world uncertainty and bank credit risk. By employing the Bayesian regression method and the Gibbs sampling algorithm, the research has obtained several noteworthy results. Firstly, the study finds that heightened world uncertainty exerts an increasing effect on bank credit risk. Secondly, the impact of world uncertainty tends to diminish when the size of banks increases or when the regulation of concentration within the system is strengthened. The results provide important insights for managers and policymakers, serving as a basis for management implications. These implications focus on managing bank size and system concentration to mitigate credit risk for Vietnamese commercial banks.
- Keywords
-
JEL Classification (Paper profile tab)G21, G32, G34, G28
-
References40
-
Tables4
-
Figures1
-
- Figure 1. Testing the convergence of MCMC chains
-
- Table 1. Summary of variables
- Table 2. Descriptive statistics
- Table 3. Regression results
- Table 4. Effective sample size
-
- Aaberge, R., Liu, K., & Zhu, Y. (2017). Political uncertainty and household savings. Journal of Comparative Economics, 45(1), 154-170.
- Ahir, H., Bloom, N., & Furceri, D. (2018). The World Uncertainty Index. SSRN Electronic Journal.
- Al-Thaqeb, S. A., Algharabali, B. G., & Alabdulghafour, K. T. (2022). The pandemic and economic policy uncertainty. International Journal of Finance & Economics, 27(3), 2784-2794.
- Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.
- Bilgin, M. H., Danisman, G. O., Demir, E., & Tarazi, A. (2021). Economic uncertainty and bank stability: Conventional vs. Islamic banking. Journal of Financial Stability, 56, 100911.
- Bloom, N., Floetotto, M., Jaimovich, N., Saporta-Eksten, I., & Terry, S. J. (2018). Really Uncertain Business Cycles. Econometrica, 86(3), 1031-1065.
- Bordo, M. D., Duca, J. V., & Koch, C. (2016). Economic Policy Uncertainty and the Credit Channel: Aggregate and Bank Level U.S. Evidence Over Several Decades. Journal of Financial Stability, 26, 90-106.
- Botshekan, M. H., Takaloo, A., & Abdollahi Poor, M. S. (2021). Global economic policy uncertainty (GEPU) and non-performing loans (NPL) in Iran’s banking system: Dynamic correlation using the DCC-GARCH approach. Journal of Money and Economy, 16(2), 187-212.
- Caglayan, M., & Xu, B. (2019). Economic policy uncertainty effects on credit and stability of financial institutions. Bulletin of Economic Research, 7(3), 342-347.
- Chi, Q., & Li, W. (2017). Economic policy uncertainty, credit risks and banks’ lending decisions: Evidence from Chinese commercial banks. China Journal of Accounting Research, 10(1), 33-50.
- Dang, B. K., Anh, H. N., & Pham, T. V. T. (2025). The Impact of policy uncertainty and economic freedom on bank stability: Global evidence. Journal of International Commerce, Economics and Policy, 16(01), 2550005.
- Dang, V. D., & Nguyen, H. C. (2022). Credit Risk Amid Banking Uncertainty In Vietnam. Bulletin of Monetary Economics and Banking, 25(1), 73-96.
- De Haan, J., & Poghosyan, T. (2012). Bank size, market concentration, and bank earnings volatility in the US. Journal of International Financial Markets, Institutions and Money, 22(1), 35-54.
- Demir, E., & Danisman, G. O. (2021). The impact of economic uncertainty and geopolitical risks on bank credit. The North American Journal of Economics and Finance, 57, 101444.
- Desalegn, T. A., Zhu, H., & Borojo, D. G. (2023). Economic policy uncertainty, bank competition and financial stability. Journal of Financial Economic Policy, 15(2), 123-139.
- Drobetz, W., El Ghoul, S., Guedhami, O., & Janzen, M. (2018). Policy Uncertainty, Investment, and the Cost of Capital. Journal of Financial Stability, 39, 28-45.
- Fontana, G., & Gerrard, B. (2004). A Post Keynesian theory of decision making under uncertainty. Journal of Economic Psychology, 25(5), 619-637.
- Fountas, S., Karatasi, P., & Tzika, P. (2018). Economic policy uncertainty in Greece: Measuring uncertainty for the Greek macroeconomy. South-Eastern Europe Journal of Economics, 16(1), 79-92.
- Gozgor, G., Demir, E., Belas, J., & Yesilyurt, S. (2019). Does economic uncertainty affect domestic credits? An empirical investigation. Journal of International Financial Markets, Institutions and Money, 63, 101147.
- GSO. (2024). Vietnam General Statistics Office. Hanoi.
- Gulen, H., & Ion, M. (2016). Policy Uncertainty and Corporate Investment. Review of Financial Studies, 29(3), 523-564.
- Hamdi, K., & Hassen, G. (2022). Economic policy uncertainty effect on credit risk, lending decisions and banking performance: evidence from Tunisian listed banks. Journal of Economic and Administrative Sciences, 38(2), 287-303.
- Hu, S., & Gong, D. (2019). Economic Policy Uncertainty, Prudential Regulation and Bank Lending. Finance Research Letters, 29, 373-378.
- Karadima, M., & Louri, H. (2021). Economic Policy Uncertainty and Non-performing Loans: The Moderating Role of Bank Concentration. Finance Research Letters, 38.
- Keynes, J. M. (1921). A treatise on probability. London: Macmillan.
- Knight, F. H. (1921). Risk, uncertainty and profit. Chicago: University of Chicago Press.
- Minsky, H. P. (1977). The financial instability hypothesis: An interpretation of Keynes and an alternative to ‘standard’ theory. Challenge, 20(1), 20-27.
- Nguyen, N. T. (2020). How to explain when the ES is lower than one? A Bayesian nonlinear mixed-effects approach. Journal of Risk and Financial Management, 13(2), 1-17.
- Nguyen, T. M. C., & Dao, L. K. O. (2024). The effect of world uncertainty on the credit risk of the banking system: The role of capital and concentration. Journal of Economics and Development, 320(2), 63-71.
- Novellyni, D., & Ulpah, M. (2017). Non-Performing Loans, Moral Hazard and Lending Behaviour of Indonesian Banks. International Journal of Economics & Management, 11(2), 365-378.
- Orden-Cruz, C., Paule-Vianez, J., & Lobão, J. (2023). The effect of Economic Policy Uncertainty on the credit risk of US commercial banks. International Journal of Finance & Economics, 28(3), 3420-3436.
- Ozurumba, B. A. (2016). Impact of non-performing loans on the performance of selected commercial banks in Nigeria. Research Journal of Finance and Accounting, 7(16), 95-109.
- Salas, V., & Saurina, J. (2002). Credit risk in two institutional regimes: Spanish commercial and savings banks. Journal of Financial Services Research, 22(3), 203-224.
- Sriboonchitta, S., Nguyen, H. T., Kosheleva, O., Kreinovich, V., & Nguyen, T. N. (2019). Quantum approach explains the need for expert knowledge: on the example of econometrics. Structural Changes and their Econometric Modeling, 12, 191-199. Springer International Publishing.
- Trinh, N. T., & Vu, T. Q. (2024). The impact of economic policy uncertainty on bank stability and the moderating effect of ownership structure: empirical evidence from Chinese listed commercial banks. International Journal of Information, Business and Management, 16(4), 109-137.
- Uhde, A., & Heimeshoff, U. (2009). Consolidation in banking and financial stability in Europe: Empirical evidence. Journal of Banking & Finance, 33(7), 1299-1311.
- Van De Schoot, R., & Depaoli, S. (2014). Bayesian analyses: Where to start and what to report. European Health Psychologist, 16(2), 75-84.
- Wang, A. T. (2018). A reexamination on the effect of bank competition on bank non-performing loans. Applied Economics, 50(57), 6165-6173.
- Wu, J., Yao, Y., Chen, M., & Nam Jeon, B. (2020). Economic uncertainty and bank risk: Evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 68, 101242.
- Zhang, X., Li, F., Xu, Y., & Ortiz, J. (2022). Economic uncertainty and bank risk: the moderating role of risk governance. Ekonomska Istraživanja – Economic Research, 35(1), 1639-1657.


