Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)


Internal and Macroeconomic Factors Affecting the Capital Adequacy Ratio of Commercial Banks in Vietnam

Author(s): Mai Thanh Loan, Tran Trong Khue

Capital adequacy ratio is an important criterion, a measure of the safety and soundness of banks and financial institutions. When the bank’s capital is maintained at a safe level, it will ensure the smooth operation of the bank and be able to withstand shocks when the economy is adverse. Determining capital adequacy is the bank’s adjustment of capital levels to absorb all unexpected losses arising in the future and ensure the safety of fixed assets. Thus, this study aims to determine how the internal factors in the bank and the macroeconomic factors of the economy affect the capital adequacy ratio (CAR) of the bank. The study used data from 18 commercial banks collected during the period from 2009 to 2019. The article used panel data regression with the GMM method to overcome the defects of the model. The research results showed that the internal factors of the commercial banks, such as return on total assets (ROA), bank size (SIZE), Liquidity ratio (LIQ), negative impact on CAR. Macro-economic factors, including Gross domestic product (GDP) and Consumer price index (CPI), have a statistical significance of 1 percent. Based on the author suggests governance implications for bank managers to maintain the capital adequacy ratio at an appropriate level, comply with the law, be safe for depositors but still ensure the safety of depositors and protect the interests of shareholders.

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