The Relationship Between Liquidity, Sustainable Development, and Profitability of Commercial Banks: Empirical Evidence From Listed Banks on The Vietnam Stock Market

Abstract

This study examined how liquidity and sustainable development (ESG) affect the profitability of 27 Vietnamese commercial banks from 2019-2023, using panel regression models. Key findings indicate that ESG factors have no significant impact on Return on Assets (ROA) or Return on Equity (ROE). However, liquidity and leverage management are crucial. A higher Loan-to-Deposit Ratio (LDR) positively impacts profitability, underscoring the importance of efficient lending. Conversely, a higher Debt-to-Asset Ratio (DAR) negatively affects ROE, highlighting the risks of excessive leverage. The Capital-to-Deposit Ratio (CDR) showed no significant effect The study recommends that regulators and bank managers prioritize strengthening core lending operations and prudent leverage management to enhance the Vietnamese banking system's financial stability.