PERFORMANCE OF VIETNAMESE COMMERCIAL BANKS (2010-2024): CAPITAL, RISK MANAGEMENT AND MACROECONOMIC PERSPECTIVES

Abstract

In the context of Vietnam's banking sector reforms and Basel II/III capital pressures, understanding the factors driving bank performance is crucial for both policymakers and practitioners. Using a balanced panel of 26 commercial banks over 2010-2024, this study employs a two-way fixed effects model with Driscoll-Kraay standard errors (DK-SE) to account for cross-sectional dependence, heteroskedasticity, and serial correlation. Potential endogeneity concerns are mitigated through the use of lagged variables and model specification strategies. The results show that internal bank-level factors, particularly cost efficiency, play a dominant role and consistently outweigh macroeconomic conditions in explaining performance variation. Among these, cost inefficiency emerges as the most influential factor undermining profitability. These findings provide actionable benchmarks for improving operational efficiency and inform capital policy design in the Vietnamese banking sector.