DOES BANK LIQUIDITY RISK LEAD TO BANK'S OPERATIONAL EFFICIENCY? A STUDY IN VIETNAM

Le Ngoc Thuy Trang, Do Thi Thanh Nhan, Nguyen Thi Nhu Hao and Wing-Keung Wong
Additional contact information
Le Ngoc Thuy Trang: Undergraduate Studies Department, Ton Duc Thang University, Ho Chi Minh City, Vietnam
Do Thi Thanh Nhan: Faculty of Finance and Banking, Ton Duc Thang University, Ho Chi Minh City, Vietnam
Nguyen Thi Nhu Hao: Foreign Trade University, Ho Chi Minh City Campus, Vietnam

Advances in Decision Sciences, 2021, vol. 25, issue 4, 46-88

Abstract: This paper studies the factors affecting liquidity risk and examines the impact of liquidity risk on the operational efficiency of commercial banks in Vietnam in the period from 2010 to 2020. We find that the bank's liquidity risk measured by the difference between credit and mobilized capital on total assets, credit to mobilized capital, and equity to total assets ratio is mainly influenced by banks’ both internal and macro variables but internal variables are more important. At the same time, the performance of Vietnamese commercial banks is presented by using return on total assets, return on equity, and net profit margin. We also find that rising income from interest increases liquidity risk, suggesting that banks with growth in credit activities tend to increase liquidity risk. If there is an unexpected shock, the bank will fall into a liquidity shortage and increase liquidity risk. In general, if the risk of rising inflation is forecasted, Government will impose policies to control the money supply and inflation and require commercial banks to control liquidity and ensure banking activities strictly. In addition, we find that liquidity risk could have the opposite effect. All the above findings are our contributions to the literature. Our findings are useful in making recommendations for banks in creating strategies to improve operational efficiency towards the sustainable development of banks.

Keywords: liquidity risk; commercial banks; Vietnam; total assets; Credit to mobilized capital; Equity to total assets ratio; Return on Total Assets; Return on Equity; Net Profit Margin (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 G33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://iads.site/DOES-BANK-LIQUIDITY-RISK-LEAD-TO ... Y-A-STUDY-IN-VIETNAM (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aag:wpaper:v:25:y:2021:i:4:p:46-88

Access Statistics for this article

More articles in Advances in Decision Sciences from Asia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Vincent Pan ().