Determinants of Vietnamese Commercial Bank Profitability: The Moderating Role of Bank Size

Abstract

This study is an attempt to examine the determinants of Vietnamese commercial bank profitability under the moderating role of bank size. It uses the balanced panel data of 25 Vietnamese commercial banks in the period 2009-2021 and applies several regression estimation techniques such as FEM, REM, FGLS and PCSE. The results find evidence to support the diseconomies of scale in Vietnam banking system, the positive impact of credit risk, bank capital, liquidity, and loan volume and the negative effect of cost ratio on bank profitability. Especially, our study confirmed the moderating role of bank size on all important internal variables at a significant level. The bank size can restrain the positive impact on profitability of some bank-specific factors such as credit risk, bank capital, loan volume but it can also lighten the harmful effect of several factors such as liquidity and cost ratio. The findings have some important policy and management implications. The study is also relevant to different stakeholders in maintaining a sound and efficient banking system.