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Bank Size, Credit Risk and Bank Profitability in Vietnam

Author

Listed:
  • Dieu Thi Thanh Tran

    (Faculty of Finance-Banking and Business Administration, Quy Nhon University)

  • Ha Thi Thu Phan

    (Institute of Banking and Finance, National Economics University)

Abstract

This paper empirically examines the relationship between bank size, credit risk and profitability of Vietnam’s commercial banks during the period from 2009 to 2018. By employing off-balance sheet items in the denominator when calculating return on assets, this paper highlights the role of off-balance sheet items in generating non-interest income as well as contributes to the literature on profitability measurement. By utilising the two-step system GMM, the outcomes show that credit risk has adverse impact on profitability and this impact tends to be slighter in large size banks. The negative correlation between bank size and profitability indicates that large banks tend to perform inefficiently rather than small banks. Also, we found evidence of a non-linear relationship between bank size and profitability, suggesting that bank size has improved bank profitability until it reaches the optimal threshold, which then decreases profitability.

Suggested Citation

  • Dieu Thi Thanh Tran & Ha Thi Thu Phan, 2020. "Bank Size, Credit Risk and Bank Profitability in Vietnam," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 57(2), pages 233-251, December.
    • Handle: RePEc:mjr:journl:v:57:y:2020:i:2:p:233-251
    DOI: 10.22452/MJES.vol57no2.4
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    Cited by:

    1. Lyazzat Yespergenova & Aliya Dosmanbetova & Yengilik Baisheva & Dinmukhamed Zhakipbekov & Myrzabike Zhumabayeva & Alimshan Faizulayev, 2023. "The Factors that Drives the Cost Management Efficiency of Oil and Gas companies in Emerging Markets: The Case of Eurasian Economic Union," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 328-334, January.

    More about this item

    Keywords

    bank size; credit risk; non-linear relationship; profitability; Vietnam;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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