Determinants of banking liquidity in Vietnamese commercial banks

Abstract

— This paper measures the liquidity of Vietnamese commercial banks from 2007 to 2017 and tries to detect possible influencing factors. Using a multivariate dynamic panel regression, we examine the effects of two sets of possible determinants: macroeconomic factors, like monetary policy or economic strength, maybe bank characteristic factors, like size or profitability. Analyzing a dataset composed of 20 commercial banks in Viet Nam, we found highly significant impacts of economic indicators and bank-specific factors on banking liquidity. The study points out that increasing the national savings rate and the financial market's liquidity helps improve the liquidity ability of commercial banks in Viet Nam, while the consumer prices index has the opposite effect. Interestingly, both total assets and profitability of commercial banks have a positive impact on LDR.