The study examines the determinants of bad loans in Vietnamese commercial banks including both macroeconomic and bank-specific factors by using balanced panel data of ten commercial banks in Vietnam from 2005 to 2011. The Pooled least squares estimation technique is used to test all hypotheses. The empirical results support the view that macrojactors, such as, the inflation and the growth in real GDP impact significantly on the level of non-performing loans (NPLs) over the period of the study. Moreover, the impact of growth in real
GDP and Inflation on NPLs is instantaneous. The results also show the significant evidences for the effect of bank.\pecific variables such as the previous NPLs ratio, credit growth. bank size, inefficiency and the ratio of loans to assets on NPLs. Among these variables, the previous NPLs ratio and the credit growth show the strongest impacts on current bad loans.