Open AccessBanking Competition and Efficiency: The Case of Vietnamese Banking Industry
Author(s) -
Long Hau Le,
Truong An Duong,
Tan Nghiem Le
Publication year - 2020
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v11n2p453
Subject(s) - lerner index , competition (biology) , market power , vietnamese , economics , panel data , banking industry , monetary economics , empirical research , econometrics , business , industrial organization , financial system , microeconomics , statistics , ecology , linguistics , philosophy , mathematics , biology , monopoly
This paper is to investigate the impact of competition on the efficiency of the banking industry in Vietnam. Data are collected from the audited annual financial statements and the annual reports of 30 commercial banks during the period of 2010 – 2017. Lerner index is used to measure the market power of bank, while Data Envelope Analysis is employed to estimate the technical efficiency of bank. The impact of competition on the operational efficiency of commercial banks is estimated by Panel Vector Autoregressive model (PVAR). The empirical results seem to indicate that there is a positive impact of competition on the bank efficiency, which is in line with the “quiet-life” hypothesis. However, the statistical test does not confirm this at the traditional levels. Interestingly, the empirical results demonstrate a negative impact of bank efficiency on the market power of bank, and hence market competition. While this result shares the causality dimension with the “efficient structure” hypothesis, it presents an opposite sign on the causality. All these findings could be explained by the real situations and typical characteristics of the economy of Vietnam. This study has important implications for both researchers and practioners.