Thu Dau Mot University Journal of Science


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IMPACT OF CREDIT RISK MANAGEMENT ON PROFITABILITY OF COMMERCIAL BANKS: A CASE STUDY IN VIETNAM

Dang Thi My Dung, Zahra Salimi, Tran Hoang Viet Linh, Ninh Mai Phuong, Bui Phuong Anh, Le Buu Thanh Xuan, Vo Dang Uyen Thy
The main purpose of this study is to examine the impact of credit risk management on profitability of commercial banks in Vietnam. While the existing literature emphasizes the necessity for a more in-depth study and additional empirical evidence to elucidate intricate relationships between market dynamics and credit risk, particularly in the context of commercial banks in Southeast Asia, there remains a gap in comprehensive studies, with a specific focus on Vietnam. The secondary data was collected from 20 commercial banks from the country for the period of 11 years, from 2012 to 2022. The study used non-performing loans ratio (NPLR), capital adequacy ratio (CAR) as well as loan-loss provision ratio (LLPR) as proxies of credit risk while the financial performance is measured by return on equity (ROE). Moreover, the bank's characteristics, such as its size (SIZE), the macroeconomic inflation rate (INF), and a dummy variable that looks at how ownership type (OWN) affects the bank's profitability are all applied to quantify the independent variables. The model does not exhibit the multicollinearity issue, according to the mean Variance Inflation Factor (VIF) data. The regression results reveal that SIZE, CAR and INF variables have a significant positive effect on ROE, while the NPLR variable has an opposite significant effect on ROE. Nevertheless, there is no connection between the ROE-measured financial performance of commercial banks and the OWN or LLPR variables. This offers further valuable insights to bankers and policy makers in credit risk management of commercial banks in Vietnam to enhance the stability of the Vietnamese banking system.

Publication Information

Publisher

Thu Dau Mot University, Viet Nam

Honorary Editor-in-Chief and Chairman of the Editorial Board

Assoc. Prof. Nguyen Van Hiep

Deputy Editor-in-Chief

PhD. Trần Hạnh Minh Phương
Thu Dau Mot University

Editorial Board

Prof. Tran Van Doan
Fujen University, Taiwan
Prof. Zafar Uddin Ahmed
Vietnam National University Ho Chi Minh City

Prof.Dr. Phillip G.Cerny
The University of Manchester, United Kingdom
Prof. Ngo Van Le
University of Social Sciences and Humanities (VNU-HCM)

Prof. Bui The Cuong
Southern Institute of Social Sciences​​​​​​​
Prof. Le Quang Tri
Can Tho University

Assoc. Prof. Nguyen Van Duc
Animal Husbandry Association of Vietnam
Assoc. Prof. Ted Yuchung Liu
National Pingtung University, Taiwan

PhD. Anita Doraisami
Economics Monash University, Australia
Prof. Dr. Andrew Seddon
Asia Pacific University of Technology & innovation (APU)

Assoc. Prof. Le Tuan Anh
Thu Dau Mot University
Prof. Abtar Darshan Singh
Asia Pacific University, Malaysia

Prof.Dr. Ron W.Edwards
The University of Melbourne, Australia
Assoc. Prof. Hoang Xuan Nien
Thu Dau Mot University

PhD. Nguyen Duc Nghia
Vietnam National University Ho Chi Minh City
PhD. Bao Dat
Monash University (Australia)

PhD. Raqib Chowdhury
Monash University (Australia)
PhD. Nguyen Hoang Tuan
Thu Dau Mot University

PhD. Nguyen Thi Lien Thuong
Thu Dau Mot University

Assistant

Nguyen Thi Man
Thu Dau Mot University