Impact of the COVID-19 pandemic on bank efficiency in Vietnam
-
DOIhttp://dx.doi.org/10.21511/bbs.17(1).2022.02
-
Article InfoVolume 17 2022, Issue #1, pp. 13-23
- Cited by
- 1971 Views
-
1038 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Banking system is an important part of the financial system of each country. The operating efficiency in the commercial banking system will provide the tools and financial products more attractive and relevant to the needs of actors in the economy. The purpose of this paper is to analyze the impact of COVID-19 on the efficiency of 26 Vietnamese commercial banks. The paper uses a quantitative method with the nonparametric frontier analysis, data envelopment analysis (DEA) approach, to measure the efficiency of Vietnamese commercial banks. The paper adopts an intermediation approach as the banks are viewed as financial intermediaries providing financial services and payment services to entities in the economy. Research findings reveal that Vietnamese commercial banks have effectively leveraged the positive impacts of the COVID-19 pandemic, since the average efficiency in 2020 improved over the pre-pandemic period in 2019 on the same models for comparison and estimation. Based on such findings, the study makes some suggestions and recommendations to help Vietnamese commercial banks increase their operational efficiency in the context of the prolonged pandemic.
Acknowledgment
The author wishes to acknowledge support from the Banking University – Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.
- Keywords
-
JEL Classification (Paper profile tab)E44, G21, G41
-
References28
-
Tables7
-
Figures0
-
- Table 1. The information of banks in the dataset
- Table 2. Descriptive statistics on banks for 2019
- Table 3. Descriptive statistics on banks for 2020
- Table 4. The efficiency of 26 Vietnamese commercial banks in 2019
- Table 5. The efficiency of 26 Vietnamese commercial banks in 2020
- Table 6. Efficiency comparison of 26 Vietnamese commercial banks before and during the COVID-19 pandemic
- Table 7. Hypotheses testing results
-
- Abdel-Baki, M. A. (2010). Assessing the effectiveness of banking reform endeavours on the performance of Egyptian banks. International Research Journal of Finance and Economics, 41, 19-32.
- Antunes, J., Hadi-Vencheh, A., Jamshidi, A., Tan, Y., & Wanke, P. (2021). Bank efficiency estimation in China: DEA-RENNA approach. Annals of Operations Research.
- Avkiran, N. K. (1999). The evidence on efficiency gains: The role of mergers and the benefits to the public. Journal of Banking and Finance, 23(7), 991-1013.
- Avkiran, N. K. (2013). Bank efficiency measurement and network DEA: A discussion of key issues and illustration of recent developments in the field. In F. Pasiouras (Ed.), Efficiency and Productivity Growth: Modelling in the Financial Services Industry (pp. 171-191). John Wiley & Sons, Ltd.
- Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis. Management Science, 30(9), 1078-1092.
- Berger, A. N., & Mester, L. J. (1997). Inside the black box: What explains differences in the efficiencies of financial institutions? Journal of Banking & Finance, 21(7), 895-947.
- Casu, B., & Molyneux, P. (2003). A comparative study of efficiency in European banking. Applied Economics, 35(17), 1865-1876.
- Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444.
- Chen, X., Skully, M., & Brown, K. (2005). Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993–2000. China Economic Review, 16(3), 229-245.
- Coelli, T. J., Rao, D. S. P., O’Donnell, C. J., & Battese, G. E. (2005). An Introduction to Efficiency and Productivity Analysis (2nd ed.). Springer US.
- Colesnic, O., Kounetas, K., & Michael, P. (2020). Estimating risk efficiency in Middle East banks before and after the crisis: A metafrontier framework. Global Finance Journal, 46, 100484.
- Debreu, G. (1951). The Coefficient of Resource Utilization. Econometrica, 19(3), 273-292.
- Demir, E., & Danisman, G. O. (2021). Banking sector reactions to COVID-19: The role of bank-specific factors and government policy responses. Research in International Business and Finance, 58, 101508.
- Demirguc-Kunt, A., Pedraza, A., & Ruiz-Ortega, C. (2021). Banking Sector Performance During the COVID-19 Crisis. Journal of Banking & Finance, 133, 106305.
- Farrell, M. J. (1957). The Measurement of Productive Efficiency. Journal of the Royal Statistical Society: Series A (General), 120(3), 253-281.
- Ferreira, C. (2020). Evaluating European Bank Efficiency Using Data Envelopment Analysis: Evidence in the Aftermath of the Recent Financial Crisis. International Advances in Economic Research, 26(4), 391-405.
- Ferreira, C. (2021). Efficiency of European Banks in the Aftermath of the Financial Crisis: A Panel Stochastic Frontier Approach. Journal of Economic Integration, 36(1), 103-124.
- Gaganis, C., Galariotis, E., Pasiouras, F., & Staikouras, C. (2021). Macroprudential regulations and bank profit efficiency: International evidence. Journal of Regulatory Economics, 59(2), 136-160.
- Hassan, M. K., & Tufte, D. R. (2001). The X-efficiency of a group-based lending institution: The case of the Grameen Bank. World Development, 29(6), 1071-1082.
- Holod, D., & Lewis, H. F. (2011). Resolving the deposit dilemma: A new DEA bank efficiency model. Journal of Banking and Finance, 35(11), 2801-2810.
- Hu, S., & Zhang, Y. (2021). COVID-19 pandemic and firm performance: Cross-country evidence. International Review of Economics & Finance, 74, 365-372.
- Koopmans, T. C. (1951). Analysis of production as an efficient combination of activities. Wiley.
- Li, X., Feng, H., Zhao, S., & Carter, D. A. (2021). The effect of revenue diversification on bank profitability and risk during the COVID-19 pandemic. Finance Research Letters, 43, 101957.
- Luo, X. (2003). Evaluating the profitability and marketability efficiency of large banks: An application of data envelopment analysis. Journal of Business Research, 56(8), 627-635.
- Minviel, J. J., & Bouheni, F. B. (2021). Technical and managerial efficiency assessment of European banks using a conditional nonparametric approach. International Transactions in Operational Research, 28(2), 560-597.
- Sathye, M. (2001). X-efficiency in Australian banking: An empirical investigation. Journal of Banking and Finance, 25(3), 613-630.
- Staub, R. B., da Silva e Souza, G., & Tabak, B. M. (2010). Evolution of bank efficiency in Brazil: A DEA approach. European Journal of Operational Research, 202(1), 204-213.
- Sufian, F. (2009). Determinants of bank efficiency during unstable macroeconomic environment: Empirical evidence from Malaysia. Research in International Business and Finance, 23(1), 54-77.