INTRODUCTION
Problem Statement
Capital structure, defined as the mix of debt and equity, is crucial for companies aiming to maximize their value (Ross, Westerfield, & Jaffe, 2010) Selecting the appropriate debt-equity ratio is essential for optimizing financial performance Research on capital structure often references the renowned Modigliani and Miller (M&M) theory from 1958, which serves as a foundational framework in this field.
According to Modigliani and Miller's (M&M) theory, in perfect capital markets, a company's capital structure does not influence its value However, when considering real-world factors such as taxes and financial distress costs, capital structure choices can significantly impact a company's value due to tax shield benefits Following M&M's capital structure theory, various other theories emerged, including agency theory by Jensen and Meckling (1976), pecking-order theory, and static trade-off theory by Myers (1984) These theories suggest that capital structure not only affects a firm's value but also its operational stability Consequently, numerous researchers have explored the independent variables influencing capital structure, enabling firms to select the optimal capital structure to maximize value and ensure stable business operations.
The capital structure of a company is typically assessed using book leverage, calculated through debt-to-equity or debt-to-asset ratios, where assets equal equity plus debt Commercial banks primarily acquire funds through deposits, resulting in their equity representing a small fraction of total assets In the banking sector, the Capital Adequacy Ratio (CAR) serves as an additional measure of capital structure, as outlined in the Basel Accords by the Basel Committee on Banking Supervision CAR is determined by the ratio of equity to assets and accounts for the varying risk levels associated with different assets Generally, commercial banks with low book leverage or high CAR may miss out on tax shield benefits, while those with high book leverage or low CAR face increased financial distress costs, including potential bankruptcy.
Vietnam, a developing country, has undergone significant economic transformation since the Doi Moi reforms in 1986, shifting from a planned economy to a socialism-oriented market economy The commercial banking sector has experienced rapid growth, with the number of banks rising from 9 in 1991 to 94 by 2009, enhancing the competitiveness of the banking system In this highly competitive environment, each bank must implement effective strategies to maximize value and minimize business risks.
Among them, they need to choose the appropriate capital structure in order to carry out the purpose Table 1.1 presents quantity of commercial banks in Vietnam from
Table 1.1: Quantity of commercial banks in Vietnam
Source: State Bank of Vietnam- SBV
(!Y_ote: SOCBs: State - Owned Commercial Banks; JSCBs: Joint - Stock Commercial
Banks; JVCBs: Joint - Venture Commercial Banks; FCBs: 100% Foreign-Owned Commercial Banks and Branch of Foreign Commercial Banks)
The Vietnamese banking system has experienced rapid development, significantly contributing to economic growth and improved living standards However, it faces numerous weaknesses and shortcomings that have led to unsafe banking operations and an unstable macroeconomic environment In response, the Government and State Bank of Vietnam have initiated a restructuring project aimed at enhancing the stability and efficiency of the commercial banking system.
"Orientations and Policies to Restructure Vietnamese Banking System in 2011-
The State Bank of Vietnam has identified significant weaknesses within the Vietnamese banking system, particularly highlighting its limited financial capacity According to the decree 14112006/ND-CP, signed by the Prime Minister on November 22, 2006, all commercial banks are required to meet a minimum legal capital of 3,000 billion VND by the end of 2010 However, recent project findings indicate that three commercial banks have failed to comply with this requirement.
• the requirement to 2011 yet; moreover, there are 30 commercial banks whose charter capital are smaller than 5.000 billion VND (equivalent 240 million USD) in the end of 20 11
The Vietnamese commercial banking system is highly vulnerable to negative external factors and sudden shifts in the business environment, as evidenced by the global financial crisis in 2009 and the ongoing instability of Vietnam's macroeconomic conditions.
As of September 30, 2011, the capital structure of the Vietnamese banking system fell short of international standards, with an average Capital Adequacy Ratio (CAR) of 11.85% for commercial banks Notably, State-Owned Commercial Banks reported an average CAR of just 8.49%.
The average Capital Adequacy Ratio (CAR) of Foreign-Owned Commercial Banks in Vietnam is significantly high at 28.58% However, when excluding these banks, the real average CAR of domestic commercial banks drops to just 11.13% According to a 2005 report by the Asian Development Bank (ADB), the minimum CAR recommended for its Developing Member Countries (ADB DMCs) is 12%, highlighting concerns over lax banking regulations and directed lending practices Many Vietnamese commercial banks, particularly State-Owned Commercial Banks, fail to meet this ADB standard, resulting in a CAR that is considerably lower than that of other developing nations In contrast, Southeast Asian countries like Indonesia, the Philippines, Malaysia, and Thailand maintain safer banking systems with CARs that align with international standards.
Figure 1.1: Capital Adequacy Ratio (CAR) of developing countries
Source: State Bank ofVietnam-SBV
The current capital structure of the Vietnamese banking system is inadequate, lacking sufficient equity to mitigate risks from negative external factors and unexpected changes in the business environment Addressing the capital structure issue is crucial, and this study aims to identify the key determinants influencing bank capital structure in Vietnam By logically controlling these factors, the goal is to enhance the overall capital structure of Vietnamese banks.
According to the static trade-off theory (Myers, 1984), Vietnamese commercial banks must select an appropriate capital structure by weighing the benefits and costs of debt The benefits include tax deductibility of interest payments, while the costs encompass financial distress, such as bankruptcy expenses However, determining the optimal capital structure is challenging for these banks, as they often struggle to assess the costs associated with financial distress Consequently, bank managers can only identify a suitable range of leverage that aims to maximize the bank's value while minimizing bankruptcy risks This study does not aim to pinpoint the optimal capital structure for the Vietnamese banking system but instead seeks to identify its determinants, enabling managers to control these factors and establish leverage that aligns with their bank's business needs.
According to the previous research such as Octavia, M & Brown, R (2008), Gropp,
Research by R & Heider (2009), Caglayan & Sak (2010), and Chau (2012) indicates that various factors such as size, profitability, business risk, growth, collateral value, and dividend policy significantly influence the capital structure of commercial banks This study aims to examine the impact of these factors on the capital structure within the Vietnamese commercial banking system.
Research Objectives
This study aims to identify the factors influencing the capital structure of the Vietnamese commercial banking system and to assess the impact of each factor on this structure Additionally, the research seeks to provide policy recommendations that will enhance the development of the commercial banking sector while effectively managing associated risks Ultimately, the study aspires to offer valuable guidance for improving the capital structure of individual Vietnamese commercial banks by analyzing and controlling the relevant determinants.
Research Questions
The main question of the study is "What are the determinants of capital structure in Vietnamese commercial bank system?"
1.3.2 Sub questions i) Do factors like size, growth, collateral value, profitability, business risk and dividend policy have statistically significant in explaining the model that related with capital structure of commercial banks in Vietnam? ii) Do these factors as above have the expected sign in accordance with capital structure theories and previous studies?
Justifications ofthe study
Numerous empirical studies have explored capital structure issues, yet few have specifically examined the determinants of bank capital structure, with most research concentrated on Europe and the USA This paper aims to fill this gap by providing a comprehensive analysis of the capital structure of commercial banks in Vietnam, thereby contributing valuable insights to the academic discourse.
This study seeks to address current issues related to the capital structure of the Vietnamese commercial banking system amidst the government's restructuring efforts By analyzing the capital structure challenges, the findings will enable authorities to formulate effective policies for the development of the commercial banking sector and risk management Additionally, it empowers managers of Vietnamese commercial banks to select suitable capital structures tailored to their specific needs.
Scope of the study
The study determines the elements which have impacted on bank capital structure in Vietnam from 2007 to 20 11.
Organization ofthe study
The study is structured into four chapters: Chapter 2 reviews relevant theoretical and empirical research on capital structure, while Chapter 3 outlines the research methodology and data collection processes Findings and discussions are detailed in Chapter 4 Finally, Chapter 5 concludes the study, offering policy recommendations and addressing limitations, along with suggestions for future research directions.
LITERATURE REVIEW
Theoretical literature
The capital structure is a complex topic supported by various theories, with the foundational Modigliani and Miller theory (1958) leading the way Following this, several other significant theories emerged, including Jensen and Meckling's agency theory (1976) and Myers' pecking order and static trade-off theories (1984).
The Modigliani and Miller (M&M) theory presents two fundamental propositions: the first explores the connection between a firm's value (V) and its capital structure, while the second analyzes the relationship between the cost of capital (r5) and capital structure Each proposition is examined through three specific scenarios This article focuses extensively on the first proposition of the M&M theory.
In the first case of the Modigliani and Miller model, all assumptions are satisfied, including homogeneous expectations, uniform business risk classes, perpetual cash flows, and a perfectly competitive capital market This implies that firms and investors can borrow or lend at the same interest rate and have equal access to all relevant information, with no financial distress costs or taxes involved Additionally, Modigliani and Miller explore other scenarios where these assumptions hold true, specifically in case 2 where corporate income tax is considered, and in case 3 where both corporate income tax and financial distress costs are taken into account.
According to the Modigliani and Miller (M&M) theory, the value of both unlevered and levered firms is identical in case 1, indicating that capital structure choices do not influence firm value However, in cases 2 and 3, the firm’s value is impacted by its capital structure, as demonstrated by the functions that illustrate the relationship between firm value and capital structure.
Case 1: VL = Vu Case 2: V L = Vu + T c * B
Case 3 : V L = V u + T c * B - PV (costs of financial distress)
With V L: value of the levered firm; V u: value of the unlevered firm; B: debt value;
Tc: rate of corporate tax, Tc * B: present value of tax shield and PV(costs of financial distress) is the present value of financial distress cost
In scenario three, a firm's value increases with leverage but decreases due to financial distress costs To maximize tax shield benefits, companies must carefully select their capital structure However, excessive leverage can lead to significant financial distress costs, including bankruptcy, which negatively affects the firm's overall value.
Jensen and Meckling (1976) argued that a firm's capital structure is influenced by agency costs, leading to two primary conflicts The first conflict arises between managers and shareholders, as managers may seek to maximize their own benefits while exerting minimal effort to enhance the company's value This often results in managers opting for higher debt levels to pursue risky projects, which are intended to meet shareholders' expectations; however, if these projects incur losses, shareholders bear the financial consequences The second conflict occurs between shareholders and debt-holders, as debt-holders are guaranteed fixed returns Tensions emerge when shareholders engage in high-risk investments, as they stand to gain significantly if returns exceed debt values, while debt-holders face potential losses, given that shareholders' maximum loss is limited to their initial investment due to limited liability.
The pecking-order theory, proposed by Myers in 1984, explains a firm's capital structure choices through the lens of asymmetric information and transaction costs Asymmetric information increases the risk for outside investors, leading them to demand higher discount rates for stocks Consequently, firms prefer to finance their operations using internal funds, such as retained earnings, before resorting to external financing When external funds are necessary, firms tend to favor debt over equity.
Companies tend to rely on internal funds rather than debt when they can achieve high returns, highlighting their preference for financing projects through available resources Additionally, the concept of financial slack is crucial, as it allows businesses to maintain spare cash or easily convert assets like government bonds and stocks into cash This financial flexibility enables enterprises to seize investment opportunities as they arise.
Without financial slack, businesses are compelled to seek external funding, which often involves taking on high-interest debt or issuing common stock at prices below their face value.
2.1.4 The static trade-off theory
The static trade-off theory, introduced by Myers in 1984, posits that firms must carefully select their capital structure by weighing the advantages and disadvantages of debt financing.
Debt offers the advantage of tax-deductible interest payments, while its drawbacks include the financial distress costs associated with bankruptcy and the losses incurred during such events However, firms often struggle to identify the optimal capital structure, as they typically lack the ability to accurately assess the costs of financial distress.
In general, commercial bank is the special kind of enterprises so M&M, agency, pecking-order and static trade-off theories are absolutely applied for choosing the appropriate bank capital structure.
Empirical literature
There have many empirical studies which research about the capital structure
Empirical studies on the capital structure of non-bank financial institutions are limited According to Booth et al (2001) and Frank and Goyal (2005), various independent factors influence the leverage of these institutions, including size, profitability, business risk, growth, collateral value, and dividend policy.
Larger firms tend to utilize more debt to finance their projects, establishing a positive correlation between size and leverage Their extensive diversification makes them less susceptible to bankruptcy, reinforcing the notion that size plays a crucial role in financial stability.
Asymmetric information significantly impacts the ability of small enterprises to secure credit, as they often fail to disclose sufficient financial information, leading potential lenders to hesitate In contrast, larger firms, particularly publicly listed ones, enjoy easier access to loans due to reduced information asymmetry between owners and creditors These larger companies can leverage economies of scale when obtaining long-term financing, such as corporate bonds, and possess greater bargaining power with lenders.
Companies with higher profits typically exhibit a lower debt-equity ratio, aligning with the pecking-order theory proposed by Myers in 1984 These profitable firms prefer to finance their projects using retained earnings rather than relying on external funding, largely due to concerns related to asymmetric information and transaction costs.
A negative relationship exists between business risk and leverage, as highlighted by Frank and Goyal (2005) They assert that firms experiencing high business risk often encounter more volatile cash flows, which leads to increased costs associated with financial distress Their analysis emphasizes the trade-off between the advantages of tax shields and the potential costs of bankruptcy.
Increased financial distress reduces the likelihood of fully utilizing tax-shield benefits, prompting companies to minimize their debt levels to stabilize cash flow volatility.
Fourth, firm's growth has the negative relationship with the leverage Booth et al
Frank and Goyal (2005) identify the market-to-book ratio as an indicator of a firm's growth potential, suggesting that a higher ratio reflects greater opportunities for expansion but also an increased risk of bankruptcy Consequently, firms with elevated market-to-book ratios typically opt for lower leverage Additionally, they propose that asset growth and the ratio of capital expenditures to assets serve as further proxies for measuring growth They argue that these factors should positively correlate with book leverage, in line with pecking order theory, which posits that when profits do not rise in tandem with investment activities, firms may need to rely more on debt to sustain their growth trajectory.
Companies with substantial tangible assets tend to utilize more debt, as these assets serve as effective collateral According to agency theory, as outlined by Jensen and Meckling (1976), agency costs associated with debt can lead to conflicts when shareholders pursue high-risk projects If such investments yield returns below the debt value, debt-holders face losses Consequently, lenders are more inclined to offer loans and mitigate credit risk when firms possess significant tangible assets Additionally, the static trade-off theory proposed by Myers (1984) suggests that tangible assets, like land and equipment, incur lower expected financial distress costs, whereas intangible assets significantly lose value in the event of bankruptcy.
Finally, when firms have ability to pay dividend, then they will use less debts
Based on the pecking-order theory (Myers and Majluf, 1984 ), dividend is considered as good signal about future prospect of firms; accordingly, they will issue more equity and less leverage
Mishkin (2000) highlights that the capital structure of commercial banks is primarily influenced by capital requirement regulations, necessitating that banks maintain a certain capital reserve to mitigate failure risks in line with Basel Accords standards Empirical studies, including those by Octavia and Brown (2008), as well as Gropp and Heider (2009), and Caglayan and Sak, further explore these dynamics.
A study conducted in 2010 revealed that traditional factors influencing non-firm capital structure, such as size, profitability, business risk, growth, collateral value, and dividend policy, are also crucial in understanding the capital structure of banks.
In three empirical studies examining the capital structure of commercial banks, book leverage and market leverage were identified as key proxies These leverage metrics are quantified through debt-to-equity and debt-to-asset ratios, where assets are calculated as the sum of equity and debt In the banking sector, commercial banks primarily acquire debt by attracting funds from depositors.
These studies used fixed effect of panel data method to identify determinants of bank capital structure Octavia, M and Brown, R (2008), Gropp, R and Heider, F
Research by Octavia M and Brown (2009) identifies six key determinants influencing book leverage: size, profitability, growth, collateral value, dividend policy, and asset risk These factors play a crucial role in shaping a company's financial structure, as illustrated in Table 2.1, which outlines methods for measuring each determinant.
R (2008), Gropp, R and Heider, F (2009) and Caglayan, E & Sak, N (20 1 0)
1 Book Leverage (BL) 1-(book value of equity I book value of assets)
2 Market Leverage (ML) 1-(market value of equity I market value of assets)
1 Size book value of assets
2 Profitability (Prof) Profit after tax I book value of assets
3 Market-to-book ratio (MTB) Market value of assets I Book value of assets
4 Collateral (Coli) Tangible assets I book value of assets
5 Dividend (Div) Equal1 when bank pays dividend in a given year
6 Asset risk (Risk) Yearly standard deviation of daily stock price returns * (market value of equity I market value of bank)
The general function has been expressed as follow:
BLi,t =~ỡt Ln(Sizei,t-t)+~zProfi,t-1 +~3MTBi,t-I +~4Colli,t-I +~sDivi,t +
MLi,t =~ỡtLn(Sizei,t-I)+~zProfi,t-I+~3MTBi,t-I+~4Colli,t-I +~sDivi,t +
According to the results of Gropp, R & Heider, F (2009), all coefficients are statistically significant and have the expected sign in case of developed countries
Larger commercial banks tend to have a positive relationship with leverage due to their ability to attract deposits more effectively than smaller banks This is largely because depositors experience less asymmetric information and often trust the brand reputation of larger institutions Additionally, the extensive branch networks of large commercial banks provide depositors with easier access to banking services, further enhancing their appeal.
Commercial banks that generate higher profits typically exhibit lower debt-equity ratios, aligning with the pecking-order theory proposed by Myers in 1984 These banks prioritize using retained earnings to fund loans and expand banking services, rather than relying heavily on depositor funds This approach is influenced by the concepts of asymmetric information and transaction costs, which highlight the advantages of internal financing over external borrowing.
Low-profit commercial banks are often forced to rely on external funding sources, which typically involves borrowing at high deposit rates This is largely driven by the level of asymmetric information, as higher levels of information asymmetry increase the risk faced by depositors, prompting them to demand higher deposit rates from commercial banks.
Research Hypothesis
According to previous research such as Octavia, M & Brown, R (2008), Gropp, R
According to Heider et al (2009), Caglayan and Sak (2010), and Chau (2012), it is commonly accepted that the expected relationships between various determinants and leverage are as follows: size and growth have a positive correlation with leverage, while collateral, profitability, business risk, and dividend policy are expected to show a negative correlation Consequently, the study proposes six null hypotheses to explore these relationships.
H 1: Size has positive relationship with book leverage
H 2 : Growth has positive relationship with book leverage
H 3 : Collateral has negative relationship with book leverage
H 4: Profitability has negative relationship with book leverage
H 5: Business risk has negative relationship with book leverage
H 6 : Dividend policy has negative relationship with book leverage.
Conceptual Framework
Based on the previous research such as Nguyen, T.D.K & Ramachandran, N
(2006), Octavia, M & Brown, R (2008), Gropp, R & Heider, F (2009), Caglayan,
According to E & Sak (2010) and Chau (2012), key factors influencing capital structure include size, growth, collateral, profitability, business risk, and dividend policy Specifically, size and growth are positively related to leverage, while collateral, profitability, business risk, and dividend policy have a negative relationship with leverage Figure 2.1 illustrates these determinants of bank capital structure.
Chapter Summary
This chapter reviews key theoretical and empirical studies on capital structure, highlighting four fundamental theories: the Modigliani and Miller (M&M) theory from 1958, agency theory established in 1976, and the pecking order theory.
( 1984) and static trade-off theory ( 1984 ) Several empirical studies like Booth et al
(2001), Frank and Goyal (2005) argue that size, profitability, business risk, growth, collateral value and dividend policy may affect the leverage of each non- financial institution Similarly, Octavia, M & Brown, R (2008), Gropp, R & Heider, F
Research by Caglayan and Sak (2010) and Chau (2012) indicates that standard determinants of non-firm capital structure also play a significant role in shaping the capital structure of banks Specifically, factors such as size and growth are positively correlated with leverage, while collateral, profitability, business risk, and dividend policy exhibit a negative relationship with leverage.
CHAPTER 3 RESEARCH METHODOLOGY AND DATA
Chapter 3 presents the research methodology and data collection First, the research methodology part introduces the research process which has 6 steps: identify determinants of bank capital structure, collect data, carry out descriptive statistics, choose the econometrics methodology, test the model and recommend policy implications Second, the study gathers the financial reports of 25 commercial banks in Vietnamese commercial bank system in the period 2007-2011 The variables will be collected from the financial reports of each commercial bank
The research process about the capital structure of Vietnamese banking system which includes 6 steps as presented in Figure 3 1
Identify determinants of bank capital structure
Recommend policy implications Figure 3.1: Research process of the study
STEP 1 Identify determinants of bank capital structure
Based on the previous research like Octavia, M & Brown, R (2008), Gropp, R &
According to Heider (2009) and Caglayan & Sak (2010), the capital structure of banks is represented by the book leverage variable, influenced by factors such as size, profitability, growth, collateral value, dividend policy, and risk In the context of Vietnamese commercial banks, the market-to-book ratio and asset risk are typically used as proxies for growth and risk; however, due to the challenges in determining the market value of assets, asset growth is utilized as a proxy for growth instead Additionally, with only eight Vietnamese commercial banks listed on the official stock exchange, asset risk is disregarded as there is insufficient data to track daily stock prices for the remaining banks.
Instead of this, business risk is used as the proxy for risk variable
The model identifies six key determinants as independent variables: size, profitability, collateral value, growth, business risk, and dividend policy These variables and their measurement methods are detailed in Table 3.1.
1 Book leverage 1-(book value of equity I book Gropp, R & Heider, F
1 Size book value of assets (Unit: 1000 Gropp, R & Heider, F billion VND) (2009)
2 Growth Percentage change in total assets Nguyen, T.D.K &
3 Collateral Tangible assets I book value of Gropp, R & Heider, F
4 Profitability Profit after tax I book value of Gropp, R & Heider, F
5 Business risk Standard deviation of profit after Nguyen, T.D.K &
(Risk) tax (Unit: 1000 billion VND) Ramachandran, N (2006)
6 Dividend Equal 1 when commercial bank Gropp, R & Heider, F
(Div) pays dividend in a given year (2009)
The study gathers the financial reports of 25 Vietnamese commercial banks from
2007 to 2011 The variables in the model will be calculated from the financial reports
STEP 3 Carry out descriptive statistics
The study conducts descriptive statistics for each variable, utilizing summary indicators such as Mean, Median, Maximum, Minimum, Standard Deviation, Skewness, Kurtosis, and Jarque-Bera Additionally, it employs a correlation matrix to assess the correlation levels between independent and dependent variables, while also evaluating the relationships among independent variables to identify potential multicollinearity issues.
The general function in the model: BLi,t=f(Sizei,t-t Pro:fi,t Colli,t-t Growi,t Riski,t
Divi,t) with i shows the ith commercial bank unit and t for the tth time period (i=l-
Based on Gujarati, N.D and Porter, C.D (2009), the study tends to apply 2 panel data regressions in the model: Fixed Effects Model (FEM) and Random Effects Model (REM)
First, the specific function ofFEM is:
FEM : BLit = ~li + ~2 ln(Sizei,t-1) + ~3 Profi,t + ~4 Colli,t-1 + ~5 Growi,t + ~6
The intercepts of commercial banks differ, yet remain stable over time, while the slope coefficients are assumed to be constant To account for these varying intercepts among banks, the fixed effect least-squares dummy variable (LSDV) method can be utilized The regression analysis is presented accordingly.
BLit = a1 + a2D2i + a3D3i + + a24D24i + a25D25i + ~2 ln(Sizei,t-1)+ ~3 Pro:fi,t+ ~4
The equation Colli,t-1 + ~5 Growi,t + ~6 Riski,t + ~7 Divi,t + Uit illustrates the relationship between various factors affecting commercial banks In this model, D2i equals 1 for the second bank and 0 for others, while D3i equals 1 for the third bank and 0 for others It is commonly understood that a1 represents the intercept for commercial bank 1, with the other coefficients (a) indicating the differences in intercepts between each bank and bank 1.
Second, the specific function of REM is:
REM: BLit = Pli + P2 ln(Sizei,t-1) + P3 Profi,t+ P4 Colli,t-t+ Ps Growi,t+ P6 Riski,t+ P1 Divi,t + uit
In this model, P1i is treated as a random variable with an expected mean value of p1, rather than being fixed like in the FEM approach Each commercial bank's intercept can be expressed as Pli = P1 + Ej, where Ej represents a random error term that has a mean of zero and a variance of cre2.
Therefore, this function can be rewritten as below:
BLit = P1+ P2 ln(Sizei,t-1)+ P3 Profi,t+ P4 Colli,t-1+ Ps Growi,t+ P6 Riski,t+ P1
Divi,t +wit (with wit= Ei+ Uit)
Based on econometrics textbooks and user's guide documents like Eviews 6 User's Guide I and II (2007), Griffiths, E.W., Hill, C.R., & Lim, C.G (2008), Asteriou, D.,
& Hall., G.S (2009), Gujarati, N.D., & Porter, C.D (2009), several tests are applied in the model
First, the study performs the likelihood ratio test in order to check the fixed effects
The analysis evaluates the equality of dummy variable coefficients under the null hypothesis that all coefficients are identical If this null hypothesis is rejected, it is recommended to use the Fixed Effects Method in the study Conversely, if the null hypothesis is accepted, the study can employ pooled least squares to assess the impact of independent variables on the dependent variable.
The Hausman Test will be utilized to determine the suitable model between Fixed Effects Model (FEM) and Random Effects Model (REM) This test assesses the significance of the differences between FEM and REM, with the null hypothesis stating that the estimators of both models do not differ significantly If the null hypothesis is rejected, it indicates that REM is not an appropriate method, as there is a close interrelation between the random effects and one or more regressors.
The t-test and F-test are essential tools for assessing the statistical significance of independent variables in a model These tests help determine if the independent variables align with theoretical expectations regarding their signs Specifically, the t-test evaluates the significance of each coefficient, where the null hypothesis is stated as Hok: ~k = 0 (for k=2-7, corresponding to six independent variables) The t-value can be calculated using the formula: tk = ~"k / standard error.
If ltkl > ta1 2, df, the null hypothesis Hok is rejected It means that the independent variable k have really impacted on the dependent variable
Moreover, F -test is testing the overall significance The null hypothesis can be expressed as follows: Ho: a2 = a3 = = a25 = ~2 = ~3 = ~4 = ~5 = ~6 = ~7 = 0 (FEM) or ~2 = ~3 = ~4 = ~5 = ~6 = ~7 = 0 (REM)
F is computed by the equation as follows: F = BSS/df = Bssf(k-l) = R 2 /(k-l) with
In statistical analysis, the coefficient of determination (R²) is calculated using the formula R² = ESS/TSS, where ESS represents the explained sum of squares, TSS is the total sum of squares, and RSS denotes the residual sum of squares Additionally, TSS can be expressed as the sum of ESS and RSS, with 'k' indicating the number of coefficients and 'n' the number of observations.
To reject the null hypothesis (H0), the critical value of F, denoted as Fa(k-1, n-k), must be evaluated, where k-1 represents the numerator degrees of freedom and n-k signifies the denominator degrees of freedom This indicates that the independent variables significantly influence the dependent variable.
DATA AND RESEARCH METHODOLOGY
Data
The study analyzes the financial reports of 25 commercial banks in Vietnam from 2007 to 2011, including four state-owned banks (Vietcombank, Vietinbank, BIDV, and Mekong Housing Bank) and 21 private banks The sample encompasses both large and small to medium-sized banks, with four institutions having total assets exceeding 200,000 billion VND and ten banks with assets below 50,000 billion VND as of December 31, 2011 The average total assets for the banks in the sample amounted to 122,268 billion VND on that date, as detailed in Table 3.2, which categorizes the commercial banks based on their asset levels.
Table 3.2: Classifying banks in the sample by certain asset level on December 31,
Asset level (VND billion) Number of commercial banks Frequency
Source: Financial reports in 2011 of each commercial bank
These variables which are applied in the model can be calculated easily from the financial reports of each commercial bank
Total asset and total shareholder's equity of the sample and total Vietnamese banking system on December 31, 20 11 are shown in Table 3.3
Table 3.3: Financial items of the sample and total Vietnamese banking system on
Source: State Bank of Vietnam and sample summary
Table 3.3 indicates that the total assets of the sample represent 62% of the entire Vietnamese banking system, while the total shareholder's equity accounts for 59% of the Vietnamese commercial bank system This makes the sample a strong representation of the overall characteristics of the Vietnamese banking sector.
Chapter Summary
This chapter outlines the research methodology and data utilized in the study, focusing on book leverage as the dependent variable The model incorporates six independent variables: size, growth, collateral, profitability, business risk, and dividend To evaluate the impact of these variables on book leverage, the study employs both the Fixed Effects Model (FEM) and Random Effects Model (REM) Data was gathered from the financial reports of 25 Vietnamese commercial banks during the period from 2007 to 2011.
FINDINGS AND DISCUSSION
Descriptive Statistics
The study presents summary statistical indicators for each variable, including Mean, Median, Maximum, Minimum, Standard Deviation (S.D.), Skewness, Kurtosis, and Jarque-Bera (Jar-Bera), as detailed in Table 4.1.
Table 4.1: Summary statistics of each variable
BL SIZE COLL PROF GROW RISK DN
Mean 0.8863 78.0126 0.4338 0.0118 0.6666 0.2083 0.7520 Median 0.9013 38.0157 0.4442 0.0116 0.3848 0.1198 1.0000 Maximum 0.9709 460.6039 0.7888 0.0473 8.3549 2.0070 1.0000 Minimum 0.5861 1.2953 0.1184 0.0010 -0.3085 0.0021 0.0000 S.D 0.0648 95.0879 0.1218 0.0062 1.1321 0.2776 0.4336 Skewness -1.8114 1.9822 -0.1400 1.9587 4.9327 3.4708 -1.1671 Kurtosis 7.3318 6.5491 3.0718 11.8668 31.3529 19.3761 2.3620 Jar-Bera 166.0880 147.4582 0.4353 489.4125 4693.8250 1647.7230 30.4957
The average book leverage in the Vietnamese commercial banking system is 88.63%, with a median of 90.13%, indicating a relatively high level of leverage used in banking operations Notably, Mekong Housing Bank (MHB) exhibited an exceptionally high leverage of 97.09% at the end of 2009, marking the peak value within the sample.
Moreover, the size of commercial bank system has risen quickly from 2006 to 2011
It is realized that total asset of the sample in 2011 increased 4.32 times than the one in 2006 Figure 4.1 as following has shown the total asset in the sample from 2006 to 2011
Figure 4.1: Total asset in the sample from 2006 to 2011
Since Vietnam's accession to the World Trade Organization (WTO) on November 7, 2006, the Vietnamese banking industry has attracted significant foreign investment, alongside increased interest from domestic investors due to the anticipated high profitability This influx of resources has allowed the banking system to expand by opening more branches, hiring additional personnel, and enhancing lending and investment activities However, this rapid expansion has also exposed weaknesses, particularly in commercial banks' investments in high-risk lending and securities portfolios.
As of September 30, 2011, the Vietnamese banking system faced significant challenges, with a real bad debts ratio of 6.62%, exceeding the international standard of 3% A substantial portion of commercial bank loans, approximately 1,331,032 billion VND, or 53.3% of total credit outstanding, was directed towards the real estate sector, which has since experienced a collapse This heavy reliance on real estate investments has heightened the difficulties within the banking system.
Besides, the study also uses the correlation matrix so as to measure the correlation level among variables Correlation matrix among variables is presented in Table 4.2
VARIABLE BL LN(SIZE(-1)) COLL(-1) PROF GROW RISK DIY
The correlation matrix reveals that size, collateral, and risk variables exhibit a positive correlation with book leverage, while profitability, growth, and dividend variables demonstrate a negative correlation Notably, only three independent variables—size, profitability, and dividend—align with the expected sign in relation to book leverage.
The analysis indicates that the independent variables exhibit low correlation, with the highest absolute correlation value reaching only 0.5582 Consequently, the maximum Variance Inflation Factor (VIF) is recorded at 1.45, significantly below the threshold of 10.
Therefore, the model does not exist multicollinearity.
Panel regressions results
The study intends to apply 2 methods: Fixed Effects Method (FEM) and Random Effects Method (REM)
The specific function of FEM method: BLit = a 1 + a 2Dzi + a 3D3i + + az4D24i +
UzsDzsi + Pzln(Sizei,t-1)+ P3 Profi,t+ P4 Colli,t-1+ Ps Growi,t+ P6 Riski,t+ P1 Divi,t + Uit
The specific function of REM method: BLit = Pu+ Pz ln(Sizei,t-1)+ P3 Profi,t+ P4 Colli,t-1+ Ps Growi,t+ P6 Riski,t+ P7 Divi,t + Uitã
The FEM and REM regression results are presented in Table 4.3
Table 4.3: FEM and REM regression results
Notes: t-value is in the parentheses; (*): statistically significant at 1% level of significance; (**): statistically significant at 5% level of significance
The Hausman test is utilized to determine the most suitable method between the Fixed Effects Method (FEM) and the Random Effects Method (REM) This statistical test assesses the significance of the differences between FEM and REM, with the null hypothesis asserting that the estimators from both methods do not significantly differ (Gujarati, N.D.).
Porter, C.D., 2009) The result of Hausman test is shown in Table 4.4
1 Test Cross-section random effects Test summary Chi-Sq Statistic Chi-Sq d.f Probability
2 Cross-section random effects test comparisions Variable Fixed Random Var(Difference) Probability
The Hausman test results indicate that the null hypothesis is rejected, as the p-value of the cross-section random test is 4.88%, which is below the 5% significance level Therefore, the Fixed Effects Method is deemed more suitable than the Random Effects Method Additionally, at the 5% significance level, the null hypothesis regarding the differences between the fixed effects and random effects coefficients for size, profitability, growth, business risk, and dividend policy is accepted, while it is not accepted for collateral.
Accordingly, there have much difference between the estimate results of Fixed Effects Method and Random Effects Method
The likelihood ratio test is utilized to assess the fixed effects in panel data analysis, specifically to determine if the coefficients of dummy variables are equal The null hypothesis of this test posits that all dummy variable coefficients are the same If the null hypothesis is rejected, it indicates that the Fixed Effects Model (FEM) is a more suitable approach than the pooled least square method for analyzing panel data This conclusion is supported by Griffiths, E.W., Hill, C.R., & Lim, C.G (2008), and the results of the likelihood ratio test are presented in Table 4.5.
The likelihood ratio test results indicate that the null hypothesis is rejected, as the p-values for both the cross-section F test and the Chi-square test are significantly below the 5% level of significance Consequently, the study should utilize the Fixed Effects Method rather than the pooled least squares approach.
In general, the Fixed Effects Method is the most appropriate method in the study according to the results of likelihood ratio and Hausman test
The Fixed Effects Method regression analysis reveals an F-value of 9.14 and a p-value close to zero, significantly lower than the 5% level of significance, leading to the rejection of the null hypothesis This indicates that the independent variables have a substantial impact on the book leverage variable Additionally, the model's R-squared value is 74.48%, suggesting a high goodness of fit, meaning that 74.48% of the variation in book leverage can be explained by these independent variables.
The Fixed Effects Method employs the t-test to assess the significance and direction of each independent variable in relation to book leverage The findings from the t-test within this method indicate notable results regarding the impact of these variables.
The size variable is significant at the 1% level, demonstrating a positive relationship with book leverage, which supports hypothesis H1 in line with the asymmetric information theory proposed by Myers and Majluf (1984) Large commercial banks, particularly state-owned institutions like Vietcombank, Vietinbank, and BIDV, are more successful in attracting deposits compared to smaller banks due to reduced asymmetric information Depositors tend to trust the reputable brand names of these large banks, and their extensive branch networks across Vietnam facilitate easier access to banking services.
The growth variable is significant at the 1% level, indicating a positive relationship between growth and book leverage, leading to the full acceptance of hypothesis H2 This aligns with the pecking-order theory, suggesting that when profits of Vietnamese commercial banks do not rise in tandem with credit growth or banking service investments, these banks are likely to attract more deposits to sustain high growth.
The collateral variable is significant at the 5% level and exhibits a negative relationship with book leverage, leading to the full acceptance of hypothesis H3 This finding contrasts with agency theory but aligns with the cases of commercial banks in developing countries, as supported by the studies of Octavia, M and Brown, R (2008) and Caglayan, E & Sak, N (2010).
In the Vietnamese banking system, approximately 44% of assets are utilized as collateral, which is comparable to the 43.5% average seen in other developing nations This figure significantly exceeds the 26.5% average for developed countries, highlighting the distinct reliance on collateral within Vietnam's financial landscape.
M and Brown, R (2008) Therefore, one additional currency unit of tangible asset in Vietnamese banking system may have lower marginal benefit in ensuring debts than the case of developed countries
The profitability variable is significant at the 1% level, revealing a negative relationship with book leverage, leading to the rejection of hypothesis H4 This aligns with the pecking-order theory proposed by Myers (1984), which suggests that high-profit commercial banks in Vietnam prioritize using retained earnings for loans and service development rather than relying heavily on depositor funds In contrast, low-profit banks are compelled to seek external financing, often at higher deposit rates, due to increased asymmetric information and associated risks that depositors face, resulting in their demand for higher returns.
The study rejects the null hypothesis H5, indicating that the risk variable is not statistically significant in establishing a negative relationship with book leverage This outcome may be attributed to the realities of the Vietnamese banking system, where the government has identified significant weaknesses in risk management among commercial banks, as outlined in the "Orientations and Policies to Restructure Vietnamese Banking System in 2011-2015" project Consequently, these banks often lack awareness of effective risk management, leading to inadequate adjustments in their capital structures Additionally, small and medium-sized banks face challenges with high-risk credit portfolios and increasing bad debts, prompting them to raise deposit rates to attract more deposits and address liquidity deficits rather than reducing leverage to mitigate bankruptcy risks, contrary to the static trade-off theory proposed by Myers.
In 1984, strategies were implemented to enhance credit portfolios and secure refinancing capital from the State Bank of Vietnam, particularly in times of insolvency These efforts have significantly impacted financial stability and resilience.
Hanoi Building Commercial Bank (HBB) paid dividends annually from 2006 to
In 2011, HBB experienced a significant increase in leverage due to pressure from shareholders, leading to an insolvency crisis in 2012 To avert bankruptcy and enhance operational efficiency, HBB merged with Saigon-Hanoi Commercial Bank (Hanoi Building Commercial Bank, 2012).
Panel regression analysis reveals that size, growth, collateral, and profitability are statistically significant factors influencing the book leverage of Vietnamese commercial banks, exhibiting the expected relationship In contrast, business risk and dividend variables do not significantly impact the capital structure within this banking system.
Comparison with previous studies
This study employs the Fixed Effects Model (FEM) regression to identify the determinants of bank capital structure, aligning with methodologies used in previous research by Octavia and Brown (2008), as well as Gropp and Heider (2009) and Caglayan et al.
Chau, N.H (2012) conducted research on the Vietnamese commercial banking system, while Octavia, M & Brown, R (2008) and Caglayan, E & Sak, N (2010) focused on the banking systems of developing countries Additionally, Gropp, R & Heider, F (2009) examined the banking systems in developed countries.
Research consistently indicates that both size and profitability significantly influence book leverage Specifically, larger firms tend to exhibit a positive correlation with book leverage, aligning with the asymmetric information theory proposed by Myers and Majluf (1984) Conversely, profitability demonstrates a negative relationship with book leverage, supporting the pecking-order theory articulated by Myers (1984).
The study has shown that there is positive relationship between growth and book leverage Growth variable in the study is measured by the percentage change in total
•' assets The result is in accordance with the pecking-order theory (Myers, 1984)
Chau, N.H (2012) also has the same result about the Vietnamese case Meanwhile, Octavia, M & Brown, R (2008), Gropp, R & Heider, F (2009), Caglayan, E &
Sak, N (2010) have used market-to-book ratio as the proxy for growth variable
The study reveals a negative relationship between collateral and book leverage, aligning with previous research on the capital structure of banks in developing countries This is largely due to the fact that many tangible assets held by commercial banks in these regions are utilized as collateral.
Therefore, one further currency unit of tangible asset in developing countries banking system may have lower marginal benefit in ensuring debts
The study reveals that business risk and dividend policy are not statistically significant determinants, a finding contextualized within the realities of Vietnam.
(2010) and Chau, N.H (2012) did not put these determinants into the model
However, the determinants of Octavia, M & Brown, R (2008) and Gropp, R &
Heider, F (2009) are statistically significant and have the expected sign according to the agency and pecking-order theories
In general, Table 4.6 summarizes research results of several banking capital structure studies
Table 4.6: Summary of research results Study I Variable Size Growth Collateral Profitability Risk Dividend
(Notes: +: positive with book leverage; -: negative with book leverage; (?): statistically insignificant; No: no independent variable in the model).
Chapter Summary
This chapter presents the findings of descriptive statistics and panel regression analysis It utilizes key statistical indicators, including Mean, Median, Maximum, Minimum, Standard Deviation, Skewness, Kurtosis, and the Jarque-Bera test, while also incorporating a correlation matrix to enhance the understanding of the data relationships.
The analysis indicates that there is no multicollinearity present in the model The panel regression results suggest that the Fixed Effects Model (FEM) is the most suitable for explaining capital structure Additionally, the t-test results reveal that size, growth, collateral, and profitability are statistically significant and align with the expected signs related to book leverage In contrast, the risk and dividend variables do not show statistical significance, reflecting the specific realities of the Vietnamese commercial banking system.
CONCLUSIONS AND POLICY IMPLICATIONS
Policy Implications
5.2.1 Policy implications for total Vietnamese banking system According to the "Orientations and Policies to Restructure Vietnamese Banking System in 2011-2015" project (State Bank of Vietnam, 2011), the capital structure of Vietnamese banking system is not really good and does not meet the international standard at present The system does not have enough equity so as to prevent risks from the negative externalities and unexpected change of business environment
The State Bank of Vietnam prioritizes enhancing the capital structure of commercial banks as a crucial aspect of restructuring the Vietnamese banking system This initiative aims to reduce leverage, thereby mitigating the risk of insolvency and bankruptcy The restructuring of the banking sector is deemed essential for the overall economic reform in Vietnam In support of this mission, the Vietnamese Prime Minister signed Decision 254/QD-TTg on March 1, 2012, which outlines the "Orientations and Policies to Restructure the Vietnamese Banking System for 2011."
20 15" project of State Bank of Vietnam
The Fixed Effects Model (FEM) analysis reveals that Vietnamese commercial banks must prioritize at least one of four strategies to reduce book leverage: enhancing tangible assets, improving profitability, and reducing size and growth factors This study focuses on evaluating potential policies that the Vietnamese Government and the State Bank of Vietnam can implement to restructure the banking system effectively.
The Vietnamese Government has implemented policies aimed at reducing the bad debt ratio within the banking system, including stabilizing the economy, establishing a state-owned Debt Trading Corporation, boosting aggregate demand, and reducing inventories These measures are designed to ensure that enterprises have sufficient funds to repay their debts to commercial banks As the banking system effectively addresses the bad debt issue, commercial banks will be able to lower their provisions for loan losses, leading to improved profitability Consequently, both the Vietnamese Government and the State Bank of Vietnam are focused on reducing the leverage of the banking system.
The State Bank of Vietnam is actively restructuring the credit institution system by consolidating weaker commercial banks with stronger ones, gradually eliminating underperforming banks and enhancing the overall financial capacity of the sector Notable mergers occurred in 2011 and 2012, such as the formation of Saigon Commercial Bank (SCB) from the consolidation of several banks and the merger of Hanoi Building Commercial Bank (HBB) into Saigon-Hanoi Commercial Bank (SHB) The authorities are also encouraging foreign financial institutions to participate in this restructuring process, allowing domestic banks to leverage foreign funds and management expertise This initiative aims to reduce operating costs, improve business efficiency, and ultimately increase profits within the banking system Additionally, it provides an opportunity for banks to reassess their operational efficiency and optimize their networks, ensuring a suitable scale for economic development In summary, these policies are designed to enhance the profitability and appropriate size of the Vietnamese banking system, thereby reducing its leverage.
The State Bank of Vietnam should enhance its inspection mechanisms for the banking system to ensure that commercial banks prioritize both quality and sustainable growth over mere asset expansion By preventing a repeat of past banking bubbles, this policy aims to shift the focus from high asset growth to more stable development Additionally, the State Bank should mandate that commercial banks increase their reserves of cash and easily liquidated tangible assets, such as certificates of deposit and government bonds, to address liquidity concerns effectively Ultimately, this approach will lead to slower growth in the Vietnamese commercial banking sector while increasing the proportion of tangible assets, thereby reducing the overall leverage within the system.
To enhance risk management awareness, the State Bank of Vietnam should encourage domestic commercial banks to learn from foreign financial institutions This can be achieved by allowing these foreign entities to participate in the restructuring of the domestic banking system, thereby improving the overall understanding and implementation of effective risk management practices.
The State Bank of Vietnam must implement stringent regulations regarding the dividend policies of the Vietnamese commercial banking system Commercial banks should determine dividend payouts based on their actual financial conditions rather than succumbing to shareholder pressures Recently, the State Bank issued directive 06/CT-NHNN on November 9 to address this issue.
In 2012, a directive was established mandating that commercial banks could only distribute dividends in 2012 and 2013 if they had adequately provisioned for loan losses This reflects the authorities' commitment to implementing significant measures aimed at enhancing the capital structure of the commercial banking system.
The policies outlined above effectively regulate the key factors influencing the Vietnamese banking system, resulting in lower book leverage This reduction helps minimize the risk of insolvency and bankruptcy for commercial banks.
5.2.2 Policy implications for specific Vietnamese commercial banks cases
The study provides essential guidance for enhancing the capital structure of Vietnamese commercial banks by managing key determinants By considering the unique circumstances of each bank, managers can make informed decisions to adjust book leverage, ultimately aiming to maximize the bank's value and mitigate the risk of bankruptcy Furthermore, the study outlines policy implications for two distinct scenarios: one for high-leverage commercial banks and another for low-leverage institutions.
5.2.2.1 Policy implications for high leverage commercial banks High leverage commercial banks should consider to reduce own leverage in order to avoid facing up insolvency situations and bankruptcy events According to the results of panel regressions as above, it is realized that commercial banks need to choose at least 1 of 4 things in order to lower the book leverage: increasing tangible assets, profitability factors and decreasing size, growth factors The study aims to analyze some policies to control the determinants in order to gain the purpose
First, these commercial banks should have drastic policies to reduce bad debt ratio
Lenders can reschedule loans for customers with promising projects facing repayment challenges while urgently recovering funds from low-credit customers through collateral management By effectively reducing the bad debt ratio, they can lower provisions for loan losses or reverse bad debt provisions, ultimately enhancing their profits and decreasing leverage.
Commercial banks must prioritize both the quantity and quality of their development by thoroughly reviewing their credit and securities portfolios to prevent the formation of economic bubbles seen in previous years Instead of focusing on rapid asset growth, they should aim for sustainable growth Additionally, assessing the business efficiency of each branch will enable banks to restructure their networks to achieve an optimal size Ultimately, these policies will lead to reduced growth and lower leverage for high-leverage commercial banks, ensuring a more balanced asset level.
Commercial banks should increase their reserves of cash or easily convertible tangible assets to effectively address liquidity issues and prevent insolvency By adopting this policy, banks will enhance their tangible asset holdings, which will consequently lead to a reduction in their leverage.
Limitations and Further Studies
Although the study has identified determinants of Vietnamese commercial bank system and recommended some policy implications to the system clearly, but there exists some limitations in the study
The study suggests that commercial banks should implement policy changes to effectively manage key determinants, allowing banking managers to optimize their leverage However, it is important to note that the research did not explore the optimal capital structure within the Vietnamese commercial banking system.
If banking managers of each commercial bank have known about the optimal capital structure, then they have ability to adjust own capital structure to approach to optimal level
Based on previous studies of banking capital structure in developed and developing countries, such as those by Octavia and Brown (2008) and Gropp and Heider (2009), market leverage is often used alongside book leverage as a proxy for bank capital structure, while market-to-book ratio and asset risk serve as proxies for growth and risk variables However, due to the challenges in obtaining accurate market values for assets, debts, and equity, as well as daily stock prices for most Vietnamese commercial banks, market leverage is excluded from the model Instead, this study opts for asset growth and business risk as the proxies for growth and risk variables, deviating from the methodologies of earlier research.
The study aims to recommend some further studies about the capital structure of Vietnamese commercial bank system according to the limitations as above
Further research is needed to determine the optimal capital structure for the Vietnamese banking system This will provide banking managers with valuable insights to adjust their capital structures effectively, balancing the prevention of insolvency and bankruptcy with the goal of maximizing their commercial bank's value.
Further research on the Vietnamese banking system could explore the relationships between market leverage and various determinants, provided there is sufficient data on asset market values, debts, equity, and daily stock prices of each commercial bank Additionally, utilizing the market-to-book ratio and asset risk variables as proxies could enhance the analysis of growth and risk determinants.
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1 List of Vietnamese commercial banks in the sample
1 Bank for Foreign Trade of Vietnam www.vietcombank.com.vn (Vietcombank)
2 Vietnam Bank for Industry and Trade www vietinbank vn (Vietinbank)
3 Bank for Investment and Development of www.bidv.com.vn Vietnam (BIDV)
4 Housing Bank of Mekong Delta (MHB) www.mhb.com.vn
5 Asia Commercial Bank (ACB) www.acb.com.vn
6 Sai Gon Thuong Tin Commercial Bank www.sacombank.com.vn (Sacombank)
7 Vietnam Export Import Commercial Bank www.eximbank.com.vn (Eximbank)
8 Vietnam Technological and Commercial Joint www.techcombank.com.vn Stock Bank (Techcombank)
9 Military Commercial Bank (MB) www.mbbank.com.vn
10 Saigon Hanoi Commercial Bank (SHB) www.shb.com.vn
11 Dong A Commercial Bank www.dongabank.com.vn
12 Vietnam International Commercial Bank (VIB) www.vib.com.vn
13 Vietnam Prosperity Commercial Bank www.vpb.com.vn (VPBank)
14 Vietnam Maritime Commercial Bank (MSB) www.msb.com.vn
15 Southeast Asia Commercial Bank (SeaBank) www.seabank.com.vn
16 Nam Viet Commercial Bank (Navibank) www.navibank.com vn
17 Hanoi Building Commercial Bank (Habubank) www.habubank.com.vn
18 An Binh Commercial Bank (ABBank) www.abbank.vn
19 Southern Commercial Bank (Southern Bank) www southernbank.com.vn
20 Orient Commercial Bank (OCB) www.ocb.com.vn
21 NamA Commercial Bank (NamA Bank) www namabank.com.vn
22 Ho Chi Minh City Development Commercial www hdbank.com.vn Bank (HD Bank)
23 Saigon Bank for Industry and Trade www saigonbank.com.vn (Saigonbank)
24 Kien Long Commercial Bank (Kienlongbank) www kienlongbank.com vn
25 Western Commercial Bank (Westernbank) www.westernbank.vn
2 Fixed Effects Method (FEM) results
Dependent Variable: BL Method: Panel Least Squares Date: 11/27/12 Time: 09:52 Sample: 1 150
Periods included: 5 Cross-sections included: 25 Total panel (balanced) observations: 125
Cross-section fixed (dummy variables)
Adjusted R-squared 0.663332 S.D dependent var 0.064843 S.E of regression 0.037624 Akaike info criterion -3.511376 Sum squared resid 0.133062 Schwarz criterion -2.809955 Log likelihood 250.4610 Hannan-Quinn criter -3.226426
3 Random Effects Method (REM) results
Dependent Variable: BL Method: Panel EGLS (Cross-section random effects) Date: 11/27/12 Time: 10:00
Sample: 1 150 Periods included: 5 Cross-sections included: 25 Total panel (balanced) observations: 125 Swamy and Arora estimator of component variances
LOG(SIZE(-1)) COLL(-1) PROF GROW RISK DIV
Cross-section random Idiosyncratic random
R-squared Adjusted R-squared S.E of regression
0.420618 Mean dependent var 0.391158 S.D dependent var 0.038670 Sum squared resid 14.27753 Durbin-Watson stat 0.000000
0.523801 Mean dependent var 0.248276 Durbin-Watson stat t-Statistic
Correlated Random Effects- Hausman Test Equation: EQ03RANDOM
Test cross-section random effects Test Summary
Cross-section random effects test comparisons:
Chi-Sq Statistic Chi-Sq d.f Prob