Effect of Oil Price on Return on Assets and Z-Score of Commercial Banks in Vietnam: A Bayesian Random-Effect Panel Data Model

The paper evaluates the effect of oil price on profitability, which is represented by return on assets or ROA, and Z-score, which represents stability in banking operations, by using the Bayesian method. The research was conducted based on the data of 28 commercial banks in the period 2011–2021. The results of the posterior probability study completely support the negative effect of oil price on ROA and Z-score. However, the effect of scale on ROA and Z-score can not be confirmed. In addition, the research results provide significant statistical evidence on the impact of intrinsic factors on profitability in banking activities. Net interest margin and non-interest income ratio have positive effects on ROA; meanwhile, capital adequacy ratio, cost-to-income ratio and liquidity ratio have negative effects. On the other hand, the effects of these factors on the Z-score are in the opposite directions.