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Cost Efficiency of the Banking Sector in Vietnam: A Bayesian Stochastic Frontier Approach with Regularity Constraints

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  • Ha Thu Vu
  • Sean Turnell

Abstract

This paper investigates the cost efficiency of the Vietnamese banking industry. To obtain an appropriate estimate of cost efficiency, monotonicity and concavity constraints are incorporated in the estimation of the cost frontier using the Bayesian approach. Overall, the level of cost efficiency of Vietnam's banking sector is relatively high, around 87 percent. The findings reveal minor and insignificant differences in the cost efficiency of different groups of banks classified by ownership. Furthermore, throughout the estimation period, the industry faced a slight decrease in cost efficiency. This could be explained by increases in the costs of managing diverse activities, the enlargement of branch networks and the upgrading of the banking technology platform.

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  • Ha Thu Vu & Sean Turnell, 2010. "Cost Efficiency of the Banking Sector in Vietnam: A Bayesian Stochastic Frontier Approach with Regularity Constraints," Asian Economic Journal, East Asian Economic Association, vol. 24(2), pages 115-139, June.
    • Handle: RePEc:bla:asiaec:v:24:y:2010:i:2:p:115-139
    DOI: 10.1111/j.1467-8381.2010.02035.x
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    Cited by:

    1. Thi Lam Anh Nguyen & Xuan Vinh Vo, 2020. "Does corporate governance really matter for bank efficiency? Evidence from ASEAN countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 681-706, December.
    2. Thilakaweera, Bolanda Hewa & Harvie, Charles & Arjomandi, Amir, 2016. "Branch expansion and banking efficiency in Sri Lanka’s post‐conflict era," Journal of Asian Economics, Elsevier, vol. 47(C), pages 45-57.
    3. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    4. Thu Phan & Kevin Daly & Anh-Tuan Doan, 2018. "The effects of risks and environmental factors on bank cost efficiency: A study in East Asia and Pacific region," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1510719-151, January.
    5. Ntwiga, Davis Bundi, 2020. "Fintech and banks collaboration: Does it influence efficiency in the banking sector?," KBA Centre for Research on Financial Markets and Policy Working Paper Series 40, Kenya Bankers Association (KBA).
    6. Arandarage Mayura Prasad Arandara & Shingo Takahashi, 2023. "Productivity analysis of Sri Lankan cooperative banks: input distance function approach," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 93-117, March.
    7. Dang-Thanh Ngo, 2012. "Measuring the Performance of the Banking System Case of Vietnam (1990-2010)," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(2), pages 1-10.
    8. Alessandra Ferrari & Vo Huyen Trang Tran, 2021. "Banking, transition and financial reforms: a long-term analysis of Vietnam," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(1), pages 1-10, March.
    9. Chau Le & Aleksandar Šević & Panayiotis G. Tzeremes & Trong Ngo, 2022. "Bank efficiency in Vietnam: Do scale expansion strategies and non‐performing loans matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 822-843, January.
    10. P. Thich D. & П. Тхих Д., 2017. "Детерминанты доходности банков: эмпирические данные из Вьетнама // Determinants of Banks’ Profitability: Empirical Evidence from Vietnam," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(4), pages 37-45.
    11. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca & Parmendra Sharma, 2016. "Efficiency, innovation and competition: evidence from Vietnam, China and India," Empirical Economics, Springer, vol. 51(3), pages 1235-1259, November.
    12. Lin, Kun-Li & Doan, Anh Tuan & Doong, Shuh-Chyi, 2016. "Changes in ownership structure and bank efficiency in Asian developing countries: The role of financial freedom," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 19-34.
    13. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca, 2016. "Management Behaviour in Vietnamese Commercial Banks," Australian Economic Papers, Wiley Blackwell, vol. 55(4), pages 345-367, December.
    14. Russ Kashian & Nicholas Lovett & Yuhan Xue, 2020. "Has the affordable care act affected health care efficiency?," Journal of Regulatory Economics, Springer, vol. 58(2), pages 193-233, December.
    15. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca & Parmendra Sharma, 2016. "Bank reforms and efficiency in Vietnamese banks: evidence based on SFA and DEA," Applied Economics, Taylor & Francis Journals, vol. 48(30), pages 2822-2835, June.
    16. Man Ha & Christopher Gan & Cuong Nguyen & Patricia Anthony, 2021. "Self-Organising (Kohonen) Maps for the Vietnam Banking Industry," JRFM, MDPI, vol. 14(10), pages 1-18, October.

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