Abstract
The article aims to evaluate the business efficiency of commercial banks in Vietnam using both parametric and non-parametric approaches. In this study, the Stochastic Frontier Analysis (SFA), which belongs to a parametric method, and Data Envelopment Analysis (DEA), a non-parametric approach, are applied to a sample of 30 joint stock commercial banks in Vietnam in the period of 2011–2015. Applying Tobit regression model, the impact of bank size, bank age, and the ownership feature on the efficiency of bank service industry in Vietnam is also investigated. The analysis results show that in general, the Vietnamese banking efficiency is improving during the selected period regardless of techniques used. However, there is small level of similarity in efficiency rankings identified from the SFA and DEA models. In terms of efficiency determinants, the results show that all three variables of size, age, and state ownership have a positive impact on bank efficiency.
Highlights
The history of Vietnamese banking system started with the establishment of the State bank of Vietnam in 1951
From 1951 to 1990, the State bank of Vietnam performed a mixed function of a central bank and a commercial bank
This paper aims to investigate the banking efficiency in Vietnam during the first step phase in the third restructuring program taken by the Vietnamese government
Summary
The history of Vietnamese banking system started with the establishment of the State bank of Vietnam in 1951. The estimated function through the regression model can be considered as an optimal function that is used as a standard frontier line (Banker & Maindiratta, 1988) This parametric method can provide information about confidence intervals and standard deviations, the results would have a negative impact on the indexes if the function was incorrect (Berger & Humphrey, 1997). Researches taken to compare efficiency between banks mainly focus on the first and second restructuring programs using non-parametric method – DEA (Lieu & Nguyen, 2012; Stewart et al, 2015). Metric method requires the determination of a the business performance of an organization in- specific function for inputs and outputs to estabcludes technical efficiency, distributional efficien- lish the efficient frontier
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