Abstract
Shares of listed banks in Vietnam gain a lot of interest from investors and regulators. It is important to study the primary drivers of the banks’ share prices. In this context, Gross Domestic Product (GDP), Gold Price (GP), Ninety-day Interbank Interest Rate (R), and USD/VND Exchange Rate (FX) are selected as representatives for macroeconomic variables. A new contribution of this study is the application of interactive factors between macroeconomics and bank performance (i.e., Equity Capital (E), Deposit Аmounts (D), Loan Amounts (L), Non-performing Loans (NPLs), Leverage (LEV), Capital Adequacy Ratio (CAR), Return on Assets (ROA), and Stock Beta (Beta)) in evaluating their impact on bank share prices. Applying the econometric method of Two-Stage Least Square (2SLS) and the quarterly financial data of 13 listed banks from Q1/2009 to Q3/2020, the regression results show that GDP improvements can foster an increase in bank share prices, and this impact is strengthened if banks have good performance of ROA, CAR, and with strict control of NPLs. The R also has a positive impact on bank share prices, and the price level increases if NPLs, LEV, and Beta are controlled at optimal levels. However, empirical evidence drawn from the study also suggests that an increase in FX and GP is not a significant contributor to bank share prices, especially if the bank does not manage NPLs and LEV. Moreover, the impact of E, D, and L on the movements of bank share prices is not significant.
Highlights
In the security market, news about share prices is published daily, and any change in market price levels can measure stock returns
The R has a positive impact on bank share prices, and the price level increases if NPLs, LEV, and Beta are controlled at optimal levels
The findings revealed that the Conclusions about the interactions between mar- market index has a positive effect, whereas the ket interest rates and share prices are document- exchange rates and short-term interest rates have ed in a number of studies, the direction- negative effect on the bank share price
Summary
News about share prices is published daily, and any change in market price levels can measure stock returns. From the perspectives of both investors and issuers, understanding a series of factors influencing share prices is vital to ensure that investment decisions or equity financing are made at the appropriate time and scale. For Vietnamese commercial banks, raising equity from the private sector, especially from the stock market, is an integral part of their financial strategy. The share prices are affected by a confluence of factors existing in the national economic environment and the creditworthiness of these banks. Vietnamese commercial banks listed their shares on local stock exchanges later than firms in other industries. The first listed bank was ACB Bank in 2006, followed by Vietcombank and VietinBank in 2009.
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