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Does bank capital affect profitability and risk in Vietnam?

In this paper, we attempt to answer the question of whether or not bank capital affects profitability and risk. The paper forms an unbalanced panel with 354 observations using both data of 35 banks over the period 2007-2018. | Does bank capital affect profitability and risk in Vietnam Accounting 6 2020 273 278 Contents lists available at GrowingScience Accounting homepage www.GrowingScience.com ac ac.html Does bank capital affect profitability and risk in Vietnam Van Dung Haa aBanking University of Ho Chi Minh city Vietnam CHRONICLE ABSTRACT Article history In this paper we attempt to answer the question of whether or not bank capital affects profitability and Received October 24 2019 risk. The paper forms an unbalanced panel with 354 observations using both data of 35 banks over the Received in revised format period 2007-2018. Two-step GMM is used to estimate the impacts of bank capital on profitability and December 27 2019 risk in order to eliminate endogeneity and serial correlation issues. As a proxy of bank capital the Accepted February 28 2020 Available online bank equity ratio and equity level are used. Return on assets ROA return on equities ROE and February 28 2020 net interest margin NIM are used to measure bank profitability whereas nonperforming loan ratio Keywords and loan loss reserve ratio are used to measure bank risk. Bank capital displays significant impacts on Profitability profitability which is measured by ROA and ROE whereas capital shows no impact on bank NIM. Risk When the loan loss reserve ratio is considered as proxy of bank risk bank capital does not affect bank Banks risk. The equity ratio the proxy of bank capital displays significant negative impacts on risk whereas Capital the equity level the other proxy of bank capital shows positive impacts on bank risk. Loans Equity 2020 by the authors licensee Growing Science Canada 1. Introduction During the economic boom in the period 2006 2007 the exploitation of exchange market developed the new banks as well as the expansion of the existing banks in Vietnam especially the private commercial banks. However the economic growth was reduced by the economic recession during the period 2009 2011 and banks were .