Factors affecting the business efficiency of listed joint stock commercial banks in Vietnam

Abstract

This research is conducted to measure factors affecting the business efficiency of listed joint stock commercial banks. The balanced data was collected from 253 financial statements of 23 listed joint stock commercial banks for the period 2010 – 2020. By analyzing panel data with the fixed effects model (FEM) and random effects model (REM), the research results show that the size of total assets, market share, cost-to-revenue ratio, the ratio of equity to total assets, the ratio of bad debts to outstanding loans, provision expenses for credit risks on outstanding loans, marginal income, and the ratio of non-interest income to interest income affect are statistically significant on the business efficiency of commercial banks listed on Vietnam’s stock market. Although the outstanding loans–to-deposit ratio has a negative effect on ROA and the credit growth rate has a positive influence on ROA, the influence of these two variables is not statistically significant. The independent variables explain the dependent variable ROA by 71.64% and the dependent variable Tobin’s Q by 28.17%. Recommendations are then proposed to improve the efficiency of listed joint stock commercial banks; in particular, including: increasing assets through an increase in capital for development investment, especially in the period after the epidemic has been under control; increasing and developing reasonable mobilization and lending; saving operating costs and strictly controlling not only the provision for general risks but also the provision for specific risks; concerning increasing non-interest income through improving the quality of commercial bank services. The research also shows the limits of the study, which has not yet assessed the business efficiency by using non-financial criteria such as customer satisfaction or banks’ branding. On the other hand, for banks, the financial cycle is very large and depends closely on State Bank’s regulations, but this study has not yet mentioned it.