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The impact of economic freedom on the risk-taking behaviours of Vietnamese commercial banks

Author

Listed:
  • Buu Kiem Dang
  • Anh Dang Bao Phan

Abstract

This paper investigates the impact of economic freedom and its sub-components on bank risk-taking behaviour in the context of Vietnam. We utilise the generalised method of moments (GMM) for a sample of 22 commercial banks during the period from 2006 to 2020. The economic freedom indicator is collected from the annual publication of The Heritage Foundation. The results reveal that economic freedom will increase bank stability, which is also enhanced by monetary freedom, financial freedom, and investment freedom. Nevertheless, the higher the business freedom index is, the more probable the bank can face risks. High economic growth and low inflationary control also improve bank stability. Besides, some internal banking factors, such as size, diversification, and operating expense control, also affect the risk-taking behaviour of Vietnamese banks. The result underpins the precise policies of the Vietnamese government in promoting global economic and financial integration along with boosting the efficiency in management and scrutiny of state-owned institutions.

Suggested Citation

  • Buu Kiem Dang & Anh Dang Bao Phan, 2022. "The impact of economic freedom on the risk-taking behaviours of Vietnamese commercial banks," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 15(4), pages 353-373.
    • Handle: RePEc:ids:ijmefi:v:15:y:2022:i:4:p:353-373
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