The relationship between capital adequacy ratio and profitability of commercial banks in Vietnam

Abstract

In the context of economic fluctuations, banks’ good performance in maintaining capital adequacy levels by international standards following the circular issued by the State Bank not only helps the banks themselves develop sustainably but also contributes to the health and improvement of Vietnam’s banking system. Through research data from 30 commercial banks in Vietnam in the period 2008 - 2020, the article has studied the relationship between capital adequacy assurance and profitability of commercial banks in Vietnam. Research results show that a negative relationship exists between the level of capital adequacy and the profitability of commercial banks in Vietnam. Some control variables such as loan ratio, deposits ratio, economic growth rate, and inflation rate positively influence the efficiency ratio of cost management and hurt ROE. Similarly, some control variables such as liquidity ratio, equity ratio, net profit margin, economic growth rate, and inflation rate positively affect CAR.