Title: Macro-economic factors affect capital adequacy ratio at Vietnamese commercial banks

Authors: Kim Quoc Trung Nguyen

Addresses: Faculty of Accounting – Auditing, University of Finance – Marketing, 778 Nguyen Kiem, Ward 4, Phu Nhuan District, Ho Chi Minh City, Vietnam

Abstract: The paper aims to estimate the effect of macro-economic factors on the capital adequacy ratio at commercial banks in Vietnam: national governance quality, COVID-19, economic growth, and inflation. Using the quantitative method (feasible generalised least squares-FGLS and generalised method of moments-GMM), except for inflation, the remaining macro-economic factors are statistically significant at 5%. It means that national governance quality and economic growth hurt the capital adequacy ratio, while COVID-19 affects the ratio positively. The study also highlights the role of compliance in maintaining capital adequacy during a global crisis, such as the COVID-19 outbreak, because commercial banks will need more capital to absorb shocks in the period of financial instability caused by the pandemic. Furthermore, the author has tackled endogeneity concerns by using instrumental variables and conducted robustness tests to enhance the reliability and impartiality of the research findings.

Keywords: capital adequacy ratio; CAR; commercial banks; COVID-19; national governance quality; Vietnam.

DOI: 10.1504/IJPM.2025.144003

International Journal of Procurement Management, 2025 Vol.22 No.2, pp.152 - 171

Received: 13 Oct 2023
Accepted: 28 Nov 2023
Published online: 20 Jan 2025 *

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