Applying the CAMEL model to assess performance of commercial banks: empirical evidence from Vietnam
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Received December 25, 2019;Accepted June 11, 2020;Published June 23, 2020
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Author(s)Link to ORCID Index: http://orcid.org/0000-0003-3844-9826
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DOIhttp://dx.doi.org/10.21511/bbs.15(2).2020.16
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Article InfoVolume 15 2020, Issue #2, pp. 177-186
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The paper aims to investigate the impact of CAMEL components on the financial performance of commercial banks in Vietnam. Three econometric models are built using four CAMEL’s crucial indicators as independent variables (capital adequacy, asset quality, management effectiveness, bank liquidity) and return on assets (ROA), return on equity (ROE), and net interest margin (NIM) as proxies for commercial banks’ financial performance – dependent variables. The research sample includes 31 Vietnamese commercial banks over the 6-year period, from 2013 to 2018. The results show a better fit of the fixed effects model (FEM) in terms of the research methodology compared to the ordinary least squares (OLS) and random effects model (REM). It was found that capital adequacy, asset quality, liquidity and management efficiency affect the performance of Vietnamese commercial banks.
Acknowledgement
This research is funded by National Economics University (NEU), Hanoi, Vietnam. The authors thank anonymous referees for their contributions and the NEU for funding this research.
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JEL Classification (Paper profile tab)G20, G21, G30
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References26
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Tables6
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Figures0
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- Table 1. Dependent variable measurement
- Table 2. Independent variable measurement
- Table 3. The impact of independent variables on ROA
- Table 4. The impact of independent variables on ROE
- Table 5. The impact of independent variables on NIM
- Table 6. Summary of the impact of each factor on the performance of Vietnamese commercial banks
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Conceptualization
Anh Huu Nguyen, Hang Thu Nguyen, Huong Thanh Pham
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Formal Analysis
Anh Huu Nguyen, Hang Thu Nguyen, Huong Thanh Pham
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Investigation
Anh Huu Nguyen
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Methodology
Anh Huu Nguyen, Hang Thu Nguyen, Huong Thanh Pham
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Resources
Anh Huu Nguyen
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Supervision
Anh Huu Nguyen
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Validation
Anh Huu Nguyen
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Writing – original draft
Anh Huu Nguyen, Hang Thu Nguyen, Huong Thanh Pham
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Writing – review & editing
Anh Huu Nguyen
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Data curation
Hang Thu Nguyen, Huong Thanh Pham
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Software
Hang Thu Nguyen, Huong Thanh Pham
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Visualization
Hang Thu Nguyen, Huong Thanh Pham
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Conceptualization