A model-based approach for estimation of liquidity risk of joint-stock commercial banks in Vietnam

Abstract

The research attempts to identify the factors affecting liquidity risk of the joint-stock commercial banking system in Vietnam in the period 2008-2018. The research uses regression methods for panel data with a sample of 26 commercial banks, using secondary data collected from audited financial statements of commercial banks in Vietnam. The study performed FEM, REM, FGLS and D&K regression estimations and model’s tests. Through the SGMM method for panel data, the results show the liquidity risk of the previous year (LIQR), the liquidity of commercial banks (LIQ), the variable of the loan/total assets ratio (LTA), the ratio of credit growth (CRD), external financing ratio (EFD), credit risk provision ratio (LLP) have a positive impact on credit risk. In addition, the research results have not found statistically significant evidence on the factors of economic growth, inflation, money supply, the financial crisis affecting the liquidity risk in the case of Vietnam. This suggests important policy implications for commercial banks and the State Bank of Vietnam to control liquidity risk and to ensure the stability for the commercial banks in Vietnam.