The effects of competition on efficiency: the Vietnamese banking industry experience

Nguyen, Thanh Pham Tien, and Nghiem, Son Hong (2018) The effects of competition on efficiency: the Vietnamese banking industry experience. The Singapore Economic Review. (In Press)

[img] PDF (Accepted Publisher Version) - Accepted Version
Restricted to Repository staff only

View at Publisher Website: https://doi.org/10.1142/S021759081750011...
 
4


Abstract

Given considerable changes in the Vietnamese banking environment brought about by significant reforms towards liberalization during the last two decades, this study investigates the evolution of competition and efficiency, compares the competition and efficiency of state-owned banks to joint-stock banks, and then tests the “quiet life” hypothesis in this industry over the period 2000–2014. This study employs the efficiency-adjusted Lerner index (i.e., market power) to capture competition, and the cost efficiency estimated by a Fourier-flexible function stochastic frontier analysis (SFA) to capture bank efficiency. This study firstly finds a slight improvement of competition and cost efficiency in the Vietnamese banking sector over the analysis period. Secondly, there are no significant differences in competition and cost efficiency level between state-owned and joint-stock banks. Thirdly, a positive causality running from competition to cost efficiency is documented, providing evidence of supporting the “quiet life” hypothesis. Finally, positive efficiency effects of the banks’ capital ratio and size are found, while insignificant impacts of the growth of GDP per capita and 2007 global financial crisis were observed. The results are strongly robust to a variety of tests. The findings suggest pro-competition, pro-capitalization and pro-size expansion policies in the Vietnamese banking sector if targeting at improving the cost efficiency of Vietnamese banks.

Item ID: 51355
Item Type: Article (Research - C1)
ISSN: 1793-6837
Keywords: Vietnamese banks; competition; efficiency; quiet life hypothesis
Date Deposited: 03 Jan 2018 02:57
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150203 Financial Institutions (incl Banking) @ 100%
SEO Codes: 90 COMMERCIAL SERVICES AND TOURISM > 9001 Financial Services > 900101 Finance Services @ 100%
Downloads: Total: 4
More Statistics

Actions (Repository Staff Only)

Item Control Page Item Control Page