The determinant of capital adequacy ratio: Empirical evidence from Vietnamese banks (a panel data analysis)

Abstract

The purpose of this study is to investigate the determinant of Vietnamese banks' capital adequacy ratio (CAR) by internal banking factors. Secondary data is collected from banks' annual reports in the period of 2009-2015. FGLS method and panel data are used to examine a regression model with CAR is the dependent variable and five independent variables: bank size (SIZE), loans (LOA), loan loss reserve (LLR), liquidity (LIQ), profitability (ROE). The results show that SIZE and LIQ impact negatively on CAR with significant meanings. On the other hand, LLR and LOA also affect CAR negatively but they are insignificant.