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31/03/2022
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Le, V. H., Nguyen, A. H., Le, T. M. T., & Cao, V. B. (2022). Factors affecting capital adequacy ratio of joint-stock commercial banks in Vietnam. Journal of International Economics and Management, 22(1), 42 - 62. https://doi.org/10.38203/jiem.022.1.0041
Factors affecting capital adequacy ratio of joint-stock commercial banks in Vietnam
Main Article Content
Abstract
This paper aims to empirically examine the factors affecting the capital adequacy ratio by using the data collected from the audited financial statements of 24 joint-stock commercial banks in Vietnam over the period from 2009 to 2019 and adopting the generalized least squares estimation method. The results show that financial leverage, deposits from clients, loans to customers, liquidity, and profitability negatively affect the capital adequacy ratio. In addition, the paper also recognizes that the difference between the actual capital adequacy ratio and the prescribed minimum ones can be explained by the negative influence of bank size, financial leverage, loans to customers, liquidity, and profitability. The study provides empirical evidence and useful information for bank managers to make rational decisions in maintaining and adjusting their level of capital adequacy.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
Capital adequacy ratio, Commercial banks, Factors
References
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University, Vol. 15/58, pp. 160 - 166.
Usman, B., Lestari, H.S. and Puspa, T. (2019), “Determinants of capital adequacy ratio on the banking industry: evidence in Indonesia Stock Exchange”, Journal of Finance and Banking, Vol. 23 No. 3, pp. 443 - 453.
Vo, H.D., Nguyen, M.V. and Do, T.T. (2014), “Factors affecting capital adequacy ratio: empirical
evidence from Vietnam’s commercial banks”, Ho Chi Minh City Open University Journal of
Science, Vol. 9 No. 2, pp. 87 - 100.
Vu, H.P. and Dang, N.D. (2020), “Determinants influencing capital adequacy ratio of Vietnamese
commercial banks”, Journal of Accounting, Vol. 6, pp. 871 - 878.
Workneh, B. (2014), “Determinants of capital adequacy ratio of commercial banks in Ethiopia”, Addis Ababa University, Available at http://etd.aau.edu.et/handle/123456789/2679 (Accessed 15 March, 2021).
Quantitative Journal of Economics, Vol. 89, pp. 488 - 500.
Aktas, R., Acikalin, S., Bakin, B. and Celik, G. (2015), “The determinants of banks’ capital adequacy
ratio: some evidence from South-Eastern European countries”, Journal of Economics and
Behavioral Studies, Vol. 7 No. 1, pp. 79 - 88.
Alajmi, M. and Alqasem, K. (2015), “Determinants of capital adequacy ratio in Kuwaiti banks”,
Journal of Governance and Regulation, Vol. 4 No. 4, pp. 315 - 322.
Al-Tamimi, K.A.M. and Obeidat, S.F. (2013), “Determinants of capital adequacy in commercial banks of Jordan an empirical study”, International Journal of Academic Research in Economics and Management Sciences, Vol. 2 No. 4, pp. 44 - 58.
Basel Committee on Banking Supervision. (2008), Principles for sound liquidity risk management and supervision, Bank for International Settlements, Press and Communications, CH-4002 Basel, Switzerland, Available at https://www.bis.org/publ/bcbs138.pdf (Accessed 17 March, 2021).
Bateni, L., Vakilifard, H. and Asghari, F. (2014), “The influential factors on capital adequacy ratio in Iranian banks”, International Journal of Economics and Finance, Vol. 6 No. 11, pp. 108 - 116.
Berger, A.N. (1995), “The relationship between capital and earnings in banking”, Journal of Money, Credit, and Banking, Vol. 27 No. 2, pp. 432 - 456.
Berger, A.N. & DeYoung, R. (1997), “Problem loans and cost efficiency in commercial banks”,
Journal of Banking & Finance, Vol. 21 No. 6, pp. 849 - 870.
Bokhari, I.H., Ali, S.M. and Sultan, K. (2012), “Determinants of capital adequacy ratio in banking
sector: an empirical analysis from Pakistan”, Academy of Contemporary Research Journal,
Vol. 2 No. 1, pp. 1 - 9.
Buyuksalvarci, A. and Abdioglu, H. (2011), “Determinants of capital adequacy ratio in Turkish banks: a panel data analysis”, African Journal of Business Management, Vol. 5 No. 27, pp. 11199 - 11209.
Claessens, R. (2010), What is a bank? Linking all key banking functions, AuthorHouse UK.
Diamond, D.W. and Rajan, R.G. (2000), “A theory of bank capital”, The Journal of Finance, Vol. 55
No. 6, pp. 2431 - 2465.
Dreca, N. (2013), “Determinants of capital adequacy ratio in selected Bosnian banks”, Dumlupınar University Journal of Social Sciences, Vol. 12 No. 1, pp. 149 - 162.
El-Ansary, O.A. and Hafez, H.M. (2015), “Determinants of capital adequacy ratio: an empirical study on Egyptian banks”, Corporate Ownership and Control, Vol. 13 No. 1, pp. 806 - 816.
Gujarati, D.N. (2008), Basic econometrics (5th edition), McGraw-Hill Education.
Hair, J.F., Black, W.C., Babin, B.J., Anderson, R.E. and Tatham, R.L. (2006), Multivariate data
analysis, New Jersey: Pearson Education Inc.
Hewaidy, A.M. and Alyousef, H. (2018), “Bank-specific and macroeconomic determinants of capital adequacy ratio: evidence from Kuwaiti banks”, European Journal of Economics, Finance and Administrative Sciences, No. 99, pp. 5 - 20.
Kasmadi, K.A., Lambey, L. and Tumiwa, J.R. (2017), “Analysis of factors affecting capital adequacy ratio between Islamic bank and conventional bank case study – Mandiri Syariah and Mandiri (2009-2016)”, Journal of Economic, Management, Business and Accounting, Vol. 5 No. 3, pp. 3794 - 3803.
Keqa, F. (2021), “The determinants of banks’ capital adequacy ratio: evidence from Western Balkan countries”, Business and Economics Journal, Vol. 12 No. 3, pp. 1 - 6.
Keynes, J.M. (1936), The general theory of employment, interest and money, Macmillan and Co.,
London.
Masood, U. and Ansari, S. (2016), “Determinants of capital adequacy ratio. A perspective from
Pakistani banking sector”, International Journal of Economics, Commerce and Management,
Vol. 4 No. 7, pp. 247 - 273.
Pham, T.X.T. and Nguyen, N.A. (2017), “The determinants of capital adequacy ratio: the case of the Vietnamese banking system in the period 2011-2015”, VNU Journal of Science: Economics
and Business, Vol. 33 No. 2, pp. 49 - 58.
Shingjergji, A. and Hyseni, M. (2015), “The determinants of capital adequacy ratio in the Albanian banking system during 2007-2014”, International Journal of Economics, Commerce and Management, Vol. 3 No. 1, pp. 1 - 10.
Stern, G. and Feldman, R. (2004), Too big to fail: the hazards of bank bailouts, The Brookings
Institution Press, Washington, D.C.
Thakor, A.V. (1987), “Discussion”, Journal of Finance, Vol. 42 No. 3, pp. 661 - 663.
Than, T.T.T. and Nguyen, K.C. (2015), “The determinants of banks’ capital adequacy ratio in Vietnam”, Banking Review, Vol. 11 (June 2015), pp. 12 - 18.
The State Bank of Vietnam. (2020), Annual report 2019, Information and Communications Publishing House.
Unvan, Y.A. (2020), “Determinants of bank capital adequacy ratio in Ghana”, Journal of Yasar
University, Vol. 15/58, pp. 160 - 166.
Usman, B., Lestari, H.S. and Puspa, T. (2019), “Determinants of capital adequacy ratio on the banking industry: evidence in Indonesia Stock Exchange”, Journal of Finance and Banking, Vol. 23 No. 3, pp. 443 - 453.
Vo, H.D., Nguyen, M.V. and Do, T.T. (2014), “Factors affecting capital adequacy ratio: empirical
evidence from Vietnam’s commercial banks”, Ho Chi Minh City Open University Journal of
Science, Vol. 9 No. 2, pp. 87 - 100.
Vu, H.P. and Dang, N.D. (2020), “Determinants influencing capital adequacy ratio of Vietnamese
commercial banks”, Journal of Accounting, Vol. 6, pp. 871 - 878.
Workneh, B. (2014), “Determinants of capital adequacy ratio of commercial banks in Ethiopia”, Addis Ababa University, Available at http://etd.aau.edu.et/handle/123456789/2679 (Accessed 15 March, 2021).