Open AccessFactors affecting capital adequacy ratio of joint-stock commercial banks in Vietnam
Author(s) -
Vinh Hoàng Lê,
Anh-Tuan Nguyen,
Thuy Minh Thi Le,
Vien Bich Cao
Publication year - 2022
Publication title -
international economics and management
Language(s) - English
Resource type - Journals
ISSN - 2615-9856
DOI - 10.38203/jiem.022.1.0041
Subject(s) - capital adequacy ratio , market liquidity , debt to capital ratio , business , leverage (statistics) , profitability index , financial ratio , capital structure , finance , financial system , monetary economics , equity ratio , economics , return on equity , incentive , mathematics , statistics , microeconomics , debt
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 the generalized least squares (GLS) 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.