THE IMPACT OF CAPITAL STRUCTURE ON BANK PERFORMANCE: GMM ESTIMATION FOR THE CASE OF VIETNAM

Yıl 2021, Cilt: 13 Sayı: 1, 73 - 83, 30.07.2021

Thu Thuy Nguyen Trung Dung Nguyen Thuy Tien Dinh Khanh Linh Vu

https://doi.org/10.17261/Pressacademia.2021.1426

Öz

Purpose- Bank managers have recently focused more on capital structure with the aim of achieving optimal financial cost allocation in bank operations in order to enhance their performance.
Methodology- Employing the database of 28 Vietnamese commercial banks during the period 2010-2019, this paper investigates the impact of capital structure on bank performance.
Findings- By applying Pooled OLS, FEM and REM regression models, combined with SYS-GMM technique to fix some diagnose problems as well as endogeneity phenomena, the empirical findings reveal that capital structure (measured by total debt to assets and debt to equity ratios) negatively and significantly influences the performance of selected commercial banks (measured by ROA and ROE). Meanwhile, most of control variables (bank size, non-performing loan, liquidity, and GDP growth rate) represent significant and positive relationships with bank performance, except for the negative impact of operating cost rate.
Conclusion- Regarding these outcomes, some implications are suggested to policy makers and bank managers to improve bank performance, subsequently to enhance the stability of the Vietnamese banking system – especially under the current uncertain economic conditions.

Anahtar Kelimeler

Capital structure, bank performance, Vietnamese commercial banks, bank stability, GMM

Kaynakça

• Abugamea, G. (2018). Determinants of Banking Sector Profitability: Empirical Evidence from Palestine. Journal of Islamic Economics and Finance, 4(1), 49-67.
• Aggarwal, R. and Jacques, K.T. (2001). The impact of FDICIA and prompt corrective action on bank capital and risk: Estimates using a simultaneous equations model. Journal of Banking and Finance, 25(6),1139-1160.
• Amidu, M. (2007). Determinants of Capital Structure of Banks in Chaina: An Empirical approach. Baltic Journal of Management, 2(1), 67-79.
• Arellano, M. and Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277.
• Arellano, M. and Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68 (1), 29–51.
• Aremu, M. A. (2013). Determinants of Capital Structure in Nigerian Banking Sector. International Journal of Academic Research in Economics and Management Sciences, 2(4), 27-43.
• Baker, M., and Wurgler, J. (2002). Market timing and capital structure. The journal of finance, 57(1), 1-32.
• Bashir, A. H. M. (2003). Determinants of profitability in Islamic banks: Some evidence from the Middle East. Islamic economic studies, 11(1), 73-99.
• Berger, A. N., Hasan, I., and Zhou, M. (2010). The effects of focus versus diversification on bank performance: Evidence from Chinese banks. Journal of Banking and Finance, 34(7), 1417-1435.
• Bidhari, S. C., Salim, U., Aisjah, S., and Java, E. (2013). Effect of corporate social responsibility information disclosure on financial performance and firm value in banking industry listed at Indonesia stock exchange. European Journal of Business and Management, 5(18), 39-46.
• Bikker, J., and Hu, H., (2002). Cyclical patterns in profits, provisioning and lending of banks and procyclicality of the new Basel capital requirements. Banca Nazionale del Lavoro Quarterly Review, 143–175.
• Birru, W.M. (2016). The Impact of Capital Structure on Financial Performance of Commercial Banks in Ethiopia. Global Journal of Management and Business Research, 16 (8), 43-52.
• Blundell, R. and Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87 (1), 115–143.
• Curi, C., Lozano-Vivas, A., and Zelenyuk, V. (2015). Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all?. Journal of Banking and Finance, 61, S22-S35.
• Davydenko, A. (2010). Determinants of bank profitability in Ukraine. Undergraduate Economic Review, 7(1/2), 1-30.
• Dawood, U. (2014). Factors impacting profitability of commercial banks in Pakistan for the period of 2009-2012. International Journal of Scientific and Research Publications, 4(3), 1-7.
• Demerguç-Kunt A. and H. Huizinga. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. World Bank Economic Review, 13, 379-408.
• Demirgu¨c-Kunt, A. and Huizinga, H. (2010). Bank activity and funding strategies: the impact on risk and returns. Journal of Financial Economics, 98 (3), 626–650.
• El-Chaarani, H. and El-Abiad, Z. (2019. Analysis of Capital Structure and Performance of Banking Sector in Middle East Countries. International Journal of Economics and Financial Issues, Econjournals, 9(10), 1-11.
• Flamini, V., McDonald, C. A., and Schumacher, L. B. (2009). The determinants of commercial bank profitability in Sub-Saharan Africa. IMF Working Papers, 1-30.
• Goyal, A. M. (2013). Impact of capital structure on performance of listed public sector banks in India. International journal of business and management invention, 2(10), 35-43.
• Hasan, M. B., Ahsan, A. M., Rahaman, M. A., and Alam, M. N. (2014). Influence of capital structure on firm performance: Evidence from Bangladesh. International Journal of Business and Management, 9(5), 184-194.
• Hansen, L.P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society, 1029-1054.
• Hassan, M. K., and Bashir, A. H. M. (2003, December). Determinants of Islamic banking profitability. In 10th ERF annual conference, Morocco, 7, 2-31.
• Hausman, J. A. (1978). Specification Test in Econometrics. Econometrica, 46 (6), 1251–1271. URL http://www.jstor.org/stable/1913827.
• Hausman, J. A. and Taylor, W. E. (1981). Panel Data and Unobservable Individual Effects. Econometrica, 49 (6), 1377.
• Hawaldar, I. T., Rohit, B., Pinto, P., and Rajesha, T. M. (2017). The impact of oil price crisis on financial performance of commercial banks in Bahrain. Banks and bank systems, 12(4), 4-16.
• Hutchison, David E. and Cox, Raymond A. K. (2006). The Causal Relationship Between Bank Capital and Profitability. Annals of Financial Economics, 40-54.
• Jensen, M. and Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305–360.
• Kraus, A. and Litzenberger, R. H. (1973). A State- Preference Model of Optimal Financial Leverge. The Journal of Finance, 28 (4), 911–922.
• Lepetit, L., Nys, E., Rous, P., and Tarazi, A. (2008). The expansion of services in european Banking: Implications for loan pricing and interest margins. Journal of Banking and Finance, 32(11), 2325-2335.
• Maudos, J. and Solís, L. (2009). The determinants of net interest income in the mexican banking System: An Integrated model. Journal of Banking and Finance, 33(10), 1920-193.
• Modigliani, F. and Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. American Economic Review, 48 (3), 261–297.
• Modigliani, F. and Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. The American Economic Review, 53 (3), 433–443.
• Moulton, A. (2011). An Investigation of the Determinants and Forecast Performance of Bank Profits: The Case of Jamaican Banks. Research and Economic Programming Division, Bank of Jamaica.
• Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39 (3), 574–592.
• Myers, S. C., Majluf, N. (1984). Corporate nance and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187–222.
• Naceur, S. (2003). The Determinants of the Tunisian Banking Industry Profitability: Panel Evidence. Universite Libre de Tunis Working Papers, 1-17.
• Nguyen, T. C. & Hoang, N. V. T. (2009). The determinants of commercial banks’ financial performance in Vietnam. Journal of Banking Technology, 43 (Octobler 2009), 24-30
• Nguyen, T. N. D. & Nguyen, M. C. (2020). Factors affecting the profitability of Vietnamese commercial banks after mergers and acquisitions. Journal of Commercial Science, 147 (September 2020 2-10, ISSN 1859-3666.
• Norden, Lars, and Martin Weber. 2010. Funding modes of German banks: structural changes and their implications. Journal of Financial Services Research 38: 69–93.
• Nwude C.E, Anyalechi C.K (2018). Impact of Capital Structure on Performance of Commercial Banks in Nigeria, International Journal of Economics and Financial Issues, 8(2), 298-303.
• Ramadan, I., Kilani, Q., and Kaddumi, T (2011). Determinants of Bank Profitability: Evidence from Jordan. International Journal of Academic Research, 3(4),180-191.
• Ronoh, C. (2015). Effect of capital structure on financial performance of listed commercial banks in Kenya. A case study of Kenya commercial bank limited, The Strategic Journal of Business and Change Management, 2(72), 750-781.
• Obayumi, T. M. (2013). Determinants of Banks’ Profitability in a Developing Economy: Evidence from Nigeria. Organizations dnd Markets in Emerging Economies, 4(2/8), 97-111.
• Ongore, V. O., and Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International journal of economics and financial issues, 3(1), 237-252.
• Pinto P. and Quadras, J. M. (2016). Impact of Capital Structure on Financial Performance of Bank, International Journal of Indian Management and Strategy, 21(3), 54-59.
• Phan, T. H. & Phan, T. M. H. (2013). Analysis of factors affecting performance of Vietnamese commercial banks: testing SCP and ES hypotheses. Journal of Economic Development, October, 126-135.
• Porter, R.L. and Chiou, W.J. (2013). How has capital affected bank risk since implementation of the Basel Accords?. Banks and bank systems, 8(1), 63-77.
• Pratomo, W. A., and Ismail, A. G. (2006), Islamic bank performance and capital structure. University Library of Munich, Germany, MPRA, 6012.
• Saeed M.M, Gul A.A, and Rasheed Y.M. (2013). Impact of Capital Structure on Banking Performance (A Case Study of Pakistan), Interdisciplinary journal of contemporary research in business, 4(10), 393-403.
• San, O. T. and Heng, T. B. (2011). Capital Structure and Corporate Performance of Malaysian Construction Sector, International Journal of Humanities and Social Science, 1(2), pp. 28-36.
• Siddik, M., Alam, N., Kabiraj, S., and Joghee, S. (2017). Impacts of capital structure on performance of banks in a developing economy: Evidence from Bangladesh. International journal of financial studies, 5(2), 1-18.
• Smirlock, M. (1985). Evidence on the (non) relationship between concentration and profitability in banking. Journal of money, credit and Banking, 17(1), 69-83.
• Sufian, F. and Chong, R.R. (2008). Determinants of Bank Profitability in a Developing Economy: Empirical Evidence from the Philippines. Asian Academy of Management Journal of Accounting and Finance, 4(2), 91-112.
• Trinugroho, I., Agusman, A., and Tarazi, A. (2014). Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?. Research in International Business and Finance, 32, 139-158.
• Zeitun, R., and Tian, G. G. (2007). Does ownership affect a firm's performance and default risk in Jordan?. Corporate Governance: The international journal of business in society, 7 (1), 66-82