The impact of income diversification on liquidity creation and financial performance of Vietnamese Commercial Banks

This research is conducted to investigate the impact of income diversification on bank liquidity

creation and the financial performance of Vietnamese commercial banks from 2007 to 2017. Data

were collected from 21 Vietnamese commercial banks. Panel OLS with fixed effects and GMM

estimations were employed to process data. The results show that diversification had a negative impact

on both bank liquidity creation and bank profitability, and thus support the view that Vietnamese

commercial banks should remain focusing on their traditional lines of business rather than diversifying

towards nontraditional activities since this may lead to both a lower level of liquidity creation and

profitability. The findings of this study could draw broad inferences for researchers, policy makers,

and bank managers towards more focusing strategies to ensure the health of the banking system.

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The impact of income diversification on liquidity creation and financial performance of Vietnamese Commercial Banks
 
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