The Efficiency Effects of Bank Mergers: An Analysis of Case Studies in Vietnam

Abstract

This paper employs Data Envelopment Analysis to examine the relative efficiency for Vietnamese banks from 2008 to 2015. Efficiency level remains relatively high and stable over the examined period, suggesting the Vietnamese banking system is less affected by the global financial crisis. More specifically, technical efficiency and scale efficiency in Vietnamese banking in 2008 is examined when controlling for problem loans. The findings suggest that controlling for the exogenous impact of problem loans is important in Vietnamese banking, especially for the joint-stock banks. Furthermore, evidence from the bank merger cases studied does not support the hypothesis that acquiring banks are more efficient than the acquired banks. The efficiency improved in majority of merger cases and was not related to acquiring bank’s efficiency advantage over its targets. Small- and medium-banks should be promoted in future acquisitions as a means to enjoying efficiency gains. Finally, there are mixed results on the extent to which the benefits of efficiency gains are passed on to the public.