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Uncertainty And Bank Funding Liquidity Risk In Vietnam

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  • Van Dan Dang
  • Hoang Chung Nguyen

Abstract

This paper examines the impact of uncertainty on bank funding liquidity risk. Based on a sample of Vietnamese commercial banks from 2007 to 2019, we show evidence that micro uncertainty in the banking sector leads to higher funding liquidity risk, as proxied by lower deposit ratios. Additional analyses reveal that this nexus widely depends on bank heterogeneity. More precisely, various bank-specific forces that improve banks’ financial strength (i.e., an increase in bank return, loan quality, capitalization, liquid assets, and bank size) tend to mitigate the adverse impact of uncertainty on bank funding liquidity risk. Our findings are robust to changes in multiple combinations of regressors, different key bank-level variables to calculate the dispersion of shocks as banking uncertainty measures, and alternative econometric approaches.

Suggested Citation

  • Van Dan Dang & Hoang Chung Nguyen, 2022. "Uncertainty And Bank Funding Liquidity Risk In Vietnam," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(234), pages 29-54, July – Se.
    • Handle: RePEc:beo:journl:v:67:y:2022:i:234:p:29-54
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bank deposits; bank-specific characteristics; dynamic models; funding liquidity risk; uncertainty;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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