Concentration and efficiency in the Vietnamese banking system between 1999 and 2009 A structural model approach

• Published in: Journal of financial regulation and compliance Vol. 21; no. 3; pp. 268 - 283
• Main Authors: Ngoc Nguyen, Thao, Stewart, Chris
• Format: Journal Article
• Language: English
• Published: London Emerald Group Publishing Limited 19-07-2013
• Subjects: Banking industry; Banks; Branch banking; Commercial banks; Efficiency; Growth rate; Interest income; Loans; Market shares; Nonperforming loans; Profitability; Profits; Studies; Vietnam
• ISSN: 1358-1988; 1740-0279
• DOI: 10.1108/JFRC-10-2012-0041

Purpose - The purpose of this paper is to examine the degree of concentration and efficiency in the Vietnamese banking system using the structural model. Design/methodology/approach - The authors apply the concentration ratio (CR), Herfindahl-Hirschman Index (HHI) and concentration-profitability model based upon the Structure-Conduct-Performance (SCP) and Efficiency Hypothesis (EH) approaches to examine 48 Vietnamese commercial banks over the period 1999-2009. Findings - The authors' empirical results show that the Vietnamese banking industry has become substantially less concentrated; however, large commercial banks still dominate the whole banking system. Further, their results do not support either the traditional Structure-Conduct-Performance or the Efficiency Hypothesis. Practical implications - The State Bank of Vietnam needs to have policies for restructuring the system and promoting competition in the banking sector of Vietnam. Originality/value - This is the first such study of the Vietnamese banking system.