The impact of oil price on Z-score of Vietnamese commercial banks: Bayesian approach

Abstract

By the Bayesian method, the arcticle found the negative effect of oil prices on Z-score, a proxy of bank stability. The research dataset included 28 commercial banks from 2011 to 2021. The posterior probabilities support a negative impact of oil prices on the Z-score, with approximately 97%. The empirical results did not find any obvious effect of bank size. Capital adequacy ratio, liquidity ratio, and expense-toincome ratio have a positive effect on Z-score with the probability of over 91%, 96%, and 87%, respectively. Besides, the net interest margin and ratio of non-interest income witnessed negative influence with a probability of over 82% and 97% respectively. Those provided useful statistical evidence on the impact of oil prices as well as internal factors on the stability of banking operations.