Funding Diversification, Income Diversification and Bank Liquidity Creation: Evidence from Vietnamese Commercial Banks

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DOI: https://doi.org/10.28924/2291-8639-24-2026-74
Published: Mar 19, 2026
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Thi Minh Trang Nguyen, Thanh Tam Le, Minh Nhat Nguyen, Funding Diversification, Income Diversification and Bank Liquidity Creation: Evidence from Vietnamese Commercial Banks, Int. J. Anal. Appl., 24 (2026), 74.

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Thi Minh Trang Nguyen, Thanh Tam Le, Minh Nhat Nguyen

Abstract

In the context of a persistently volatile financial market and increasingly fierce competition, the ability to create liquidity is considered the "lifeblood" of survival for banks - a key factor in maintaining the role of financial intermediaries and ensuring the stability of the economic system. This paper investigates the impact of diversification strategy (including funding and income diversification) on the liquidity creation of 27 Vietnamese commercial banks from 2003 to 2023. We adopt panel data regression approaches, integrating endogeneity correction and robustness tests to ensure the accuracy of the results. The findings reveal that while income diversification has a positive impact on liquidity creation, funding diversification, conversely, tends to diminish the liquidity generation capacity of Vietnamese commercial banks. Furthermore, the quantile regression results indicate that the negative impact of funding diversification is more apparent in banks with low liquidity creation. In contrast, for banks with superior liquidity capacity, income diversification is more beneficial. The results obtained not only contribute to the development of banking management theory but also provide useful suggestions for policymakers and managers in building sustainable development strategies for the Vietnamese banking system.

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