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Determinants of bank profitability: The case of Vietnamese commercial banks

By Nguyen Thai Quang (VNP 23)

Supervisor: Dr. Le Van Chon

Abstract:

The profitability is an important element to evaluate performance in the banking industry. Researching about the profitability to bank’s performance is often seen. In Vietnam, there are previous researches perform the relations between profitability and factors from bank specifications to macroeconomic condition. However, no research has been found Mergers and acquisitions factor (M&A) and factor for operation range by researchers recently. The main objective of this study is to evaluate the impact of internal and external factors on profitability for The Commercial Banks in the period from 2010-2018. The study uses Pooled Ordinary Least Squared, Fixed-effects Regression and Generalized Least Square Regression to estimate the relationships between the rate of return on assets indicators and bank specifications. The inclusion of M&A dummy variables demonstrates base ROA for each specific banks. The results from the regression model showed that lending risk and the extent of operation range had an impact on bank profitability. In addition, through M&A activity, most of the commercial banks experience lower income and lending risks.

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