Management behaviour in Vietnamese commercial banks

Nguyen, Thanh, Nghiem, Son Hong, and Roca, Eduardo (2016) Management behaviour in Vietnamese commercial banks. Australian Economic Papers, 55 (4). pp. 345-367.

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Abstract

This framework is built on the interrelationships between efficiency, risk, capital and diversification. This study uses the Z-score to measure insolvency risk, the SFA to estimate cost efficiency, the ratio of total equity to total assets to capture bank capital and the HHI index to measure the diversification of revenue and earning assets. The results from the 3SLS estimator indicate that revenue diversification has an insignificant impact on insolvency risk, capital ratio and cost efficiency, but earning assets diversification has a negative effect on these three variables, supporting 'classical diversification', 'economic capital' and 'monitoring' behaviours. Moreover, a decline in cost efficiency leads to a rise in insolvency risk, implying 'bad management' behaviour; an increase in risk results in a reduction in cost efficiency, indicating 'bad luck' behaviour; and a reduction in capital ratio in the poorly capitalised banks leads to a growth in risk, suggesting 'moral hazard' behaviour. The results remain strongly robust when using an alternative risk measurement (the loan loss provision ratio) and an alternative SFA model.

Item ID: 53085
Item Type: Article (Research - C1)
ISSN: 1467-8454
Date Deposited: 10 Apr 2018 04:15
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%
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