There are many type of bacteries on human skin, but body odor seems to be caused by E. Coli[1].

I found at least one study showing that coconut oil _extract_ has negative effect on E. Coli growth[2]. Of course, this is not same as using virgin coconut oil.

There's also a study[3] showing that Coconut Oil may boost the growth for some other bacteria.

Anyway, personally I've found it to work, whatever the mechanism is.

[1] http://www.medicaldaily.com/what-causes-body-odor-small-amou...

[2] http://innovareacademics.in/journals/index.php/ijpps/article...

[3] https://www.ncbi.nlm.nih.gov/pubmed/24328700