Capital adequacy ratio and a bank’s financial stability in Vietnam

  • Received September 20, 2021;
    Accepted November 12, 2021;
    Published November 18, 2021
  • Author(s)
  • DOI
  • Article Info
    Volume 16 2021 , Issue #4, pp. 61-71
  • Cited by
    3 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

The objective of this study is to provide more empirical evidence on the impact of the capital adequacy ratio, as well as control and micro variables, on the financial stability of commercial banks in emerging markets such as Vietnam. The study analyzes the impact of the capital adequacy ratio on the financial stability of 18 Vietnamese commercial banks in the period 2010–2020 using the Generalized method of moments (GMM) model. Empirical research results show that the capital adequacy ratio has a positive correlation with the financial stability of Vietnamese commercial banks during the study period. Besides, the study also uses control variables such as Profitability through ROA and ROE, Bank Size (SIZE), Loans to Assets Ratio (LTA), Deposits to Assets Ratio (DTA), and Loan Loss Ratio (LLR), to analyze their impact on the financial stability of Vietnamese commercial banks.
Based on the above results, the study proposes some policy implications to enhance the financial stability of Vietnamese commercial banks using the capital adequacy ratio and the control variables from the GMM model that are statistically significant. The paper also pointed out four limitations of the study in terms of data, research samples, methods and research models, so that further research can be more complete.

The author wishes to acknowledge support from the Banking University of Ho Chi Minh City.
This research was made possible thanks to all valuable support from relevant stakeholders.

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    • Table 1. The information of banks in the dataset
    • Table 2. Descriptive statistics of variables
    • Table 3. Correlation coefficients matrix
    • Table 4. Regression results and robustness checks
    • Table 5. Hypotheses testing results
    • Conceptualization
      Nguyen Minh Sang
    • Data curation
      Nguyen Minh Sang
    • Formal Analysis
      Nguyen Minh Sang
    • Methodology
      Nguyen Minh Sang
    • Visualization
      Nguyen Minh Sang
    • Writing – original draft
      Nguyen Minh Sang
    • Writing – review & editing
      Nguyen Minh Sang