1. Innovation in Financial Health Assessment: Applying MCDM Techniques to Banks in Vietnam
- Author
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Trung Do Duc, Dudić Branislav, Dung Hoang Tien, and Truong Nguyen Xuan
- Subjects
evaluation of banks’ financial health ,mcdm method ,ram method ,psi method ,srp method ,o16 ,g15 ,g17 ,g21 ,g24 ,Business ,HF5001-6182 - Abstract
Assessing the financial health of banks is crucial to ensure the stability of the financial system. This is not only a way to safeguard the interests of customers and shareholders but also to prevent inherent risks and ensure reliability in banking operations. Thus, evaluating financial health plays a crucial role in maintaining stability and sustainable development in the banking sector. This study employed three methods: RAM (Root Assessment Method), PSI (Preference Selection Index), and SRP (Simple Ranking Process), to assess the financial health of twenty-eight banks in Vietnam. Capital adequacy rating, asset quality rating, management rating, earnings rating, liquidity rating, and sensitivity to market risk rating are the six criteria used to characterize each bank. The evaluation results using these three methods were compared with each other and with the evaluation using the CAMELS rating system. The study identified banks with good financial health and those with weak financial health. The notable point is that the results of ranking financial health of banks using three methods: RAM, PSI, and SRP, and according to the CAMELS system are quite similar. These findings are vital in providing valuable information for managers and investors, aiding them in making informed decisions regarding investment, risk management, and development strategies based on empirical data.
- Published
- 2024
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