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Factors affecting Non-Performing Loans (NPLs) of banks: The case of Vietnam

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  • Vo Minh Long

    (Ho Chi Minh City Open University, Vietnam)

  • Nguyen Thi Yen

    (Ho Chi Minh City Department of Finance, Vietnam)

  • Pham Dinh Long

    (Ho Chi Minh City Open University, Vietnam)

Abstract

This study aims to identify factors affecting Non-Performing Loans (NPLs) of commercial banks in Vietnam. To address the research problem, data of commercial banks in Vietnam from 2008 to 2017 were collected. This study applied a fixed-effects model in comparison with a random-effects model on a panel data of 200 observations. Results from the firmly fixed-effects model indicated that NPLs were positively affected by its lag of the previous year, capital structure, and interest rate. Additionally, returns on asset, inflation rate, and credit growth were found to have negative impacts on NPLs. However, impacts of firm size and gross domestic product were not found across the models. Based on the results, this research suggested several policy recommendations for the management of NPLs in the commercial banks.

Suggested Citation

  • Vo Minh Long & Nguyen Thi Yen & Pham Dinh Long, 2020. "Factors affecting Non-Performing Loans (NPLs) of banks: The case of Vietnam," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 10(2), pages 83-93.
    • Handle: RePEc:bjw:econen:v:10:y:2020:i:2:p:83-93
    DOI: 10.46223/HCMCOUJS.econ.en.10.2.967.2020
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    References listed on IDEAS

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    3. Vicente Salas & Jesús Saurina, 2002. "Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 22(3), pages 203-224, December.
    4. Irum Saba & Rehana Kouser & Muhammad Azeem, 2012. "Determinants of Non Performing Loans: Case of US Banking Sector," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 125-136, June.
    5. Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206.
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