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 possi- ble influencing factors. Using a multivariate dynamic panel re- gression, we examine the effects of two sets of possible determi- nants: macroeconomic factors, like monetary policy or eco- nomic 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 eco- nomic indicators and bank-specific factors on banking liquid- ity. The study points out that increasing the national savings rate and the financial market's liquidity helps improve the liq- uidity ability of commercial banks in Viet Nam, while the con- sumer prices index has the opposite effect. Interestingly, both total assets and profitability of commercial banks have a posi- tive impact on LDR.