Determinants of non-performing loans at Vietnamese joint-stock commercial banks

Abstract

This study analyzes data of 27 joint-stock commercial banks operating in Vietnam from 2005-2016 to examine the effects of macro-economic factors and bank-specific features on their rates of non-performing loans. Using difference-GMM method of regression to overcome the endogeneity, heteroskedasticity, and autocorrelation, the research results find that bank-specific variables have significantly effects. Specifically, high non-performing loans rates of previous year lead to higher rates in the current year. Banks with higher rates of loan-loss provision, higher operation-cost, higher profits will reduce bad debt ratio. The results of this study also indicate that macro-economic factors such as GDP growth have positive effects on non-performing rates of commercial banks. From the research results, the authors suggest recommendations to improve credit risks and non-performing loans for Vietnamese joint-stock commercial banks.