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Government Ability, Bank-Specific Factors and Profitability - An insight from banking sector of Vietnam

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  • Nguyen, V.C.
  • Nguyen, Thu Thuy
  • Nguyen, Huu Tinh

Abstract

To the best of our knowledge, a very few studies have focused on the effects of government ability on bank performance in developing and emerging countries. The aim of this work is to study the impact of government ability, bank-specific factors on profitability in the banking system in Vietnam. Using a panel data analysis in the period over 2014-2018, the study analyzes based on the methods of fixed, random effects, and pooled ordinary least squares. Data were collected from Vietnam’s Stock Exchange, General Statistics Office, and Worldwide Governance Indicators. Our results demonstrate that government ability has negatively affected bank efficiency while economic growth will not affect bank efficiency. In addition, the prime bank-specific factors that can significantly impact on bank efficiency are non-performing loan, loan-to-deposit ratio, loan loss reserves. A bank with a higher loan-to-deposit ratio can positively impact on the probability of a bank. In contrast to the risk, a bank with a greater risk as well as a higher level in non-performing loan in operation will negatively impact on its efficiency.

Suggested Citation

  • Nguyen, V.C. & Nguyen, Thu Thuy & Nguyen, Huu Tinh, 2020. "Government Ability, Bank-Specific Factors and Profitability - An insight from banking sector of Vietnam," OSF Preprints 9dcqp_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:9dcqp_v1
    DOI: 10.31219/osf.io/9dcqp_v1
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