Application of DuPont decomposition to risks of ROA Index: Empirical evidence of Banks in Vietnam

Abstract

The purpose of this paper is not only to find out the limits of ROA. Based on the model of DuPont, factors of decomposition formula represent contributed rate of inputs for outputs and rational rate of outputs for inputs in the structural equilibrium of ROA index to determine operating risks in banking. And, DuPont model explains the limitation of measurement for statistical index and regression. In the context, the research method in the model is OLS techniques. Through the empirical evidence in the panel-data survey of 31 Vietnam banks in the periods of 2005-2018, the results have shown the weaknesses in the banking system of Vietnam: (1) the ability to attract customers’ loans in output factors, (2) crowding-out effect of bank-operating cost on the contribution of corporate income tax to state-budget.

Keywords

• dupont decomposition
• ols
• roa