Abstract
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. AcknowledgmentThe 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.
Highlights
The world economy in general and Vietnam’s economy in particular have experienced numerous turbulences over the past period
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
In the context of more extensive and intensive international integration, it is increasingly imperative to increase the financial stability of Vietnamese commercial banks
Summary
The world economy in general and Vietnam’s economy in particular have experienced numerous turbulences over the past period. Heated growth in some industries and businesses will have both positive and negative effects on the entire economy. Commercial banks may conduct all banking operations and other business activities for profit according to the provisions of the Law on Credit Institutions. Commercial banks operate under special supervision of the State Bank of Vietnam (SBV), so financial stability of commercial banks is closely monitored by SBV in relevant legal documents.
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