Evaluating Operational and Risk-management Efficiency of Commercial Banks in Vietnam and Taiwan

Abstract

The commercial bank has formed, existed and developed for many years ago and it has gone with the development of commodity economy. It is also considered as the circulatory system of the capital of national and global economy. Because of its important role towards the economy, especially for market economy, commercial bank becomes more essential with every passing day. In general, commercial bank both holds the balance trade and decides the success or failure of an economy. Vietnam is a developing country and expected to have strong growth potential in the future. Besides, Vietnam has an important geographical location and as a link between Southeast and Northeast Asia. Taiwan is known as the country with a developed economy and has close corporation with Vietnam in recent years. They both are influenced by the impact of global economic crisis and overcome its consequence such as bad debt increasing, falling in investment, etc. For that reason, the purpose of this study is to propose some suggestions to improve performance of commercial banking system in Vietnam and Taiwan by evaluating operational and risk-management efficiency of 44 commercial banks in Vietnam and Taiwan by using Data Envelopment Analysis (DEA). Applying a two-stage DEA model, this study can assess the whole of banks efficiency. Based on the results of technical efficiency (TE), pure technical efficiency (PTE), scale efficiency (SE), the performance of the banks can be evaluated. Besides, this study also uses the slack analysis is to provide suggestions to improve banks efficiency and sensitivity analysis is to define the elements affect banks operation. Finally, the performance of banking system in Vietnam and Taiwan would be compared.