Market structure and bank performance: A comprehensive picture of Vietnam
-
Author(s)Thi Mai Phuong DuongLink to ORCID Index: https://orcid.org/0009-0001-5566-7326
,
Van Dan DangLink to ORCID Index: https://orcid.org/0000-0001-5524-8765
-
DOIhttp://dx.doi.org/10.21511/bbs.18(3).2023.07
-
Article InfoVolume 18 2023, Issue #3, pp. 74-86
- Cited by
- 495 Views
-
273 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
In the context of the fact that the structure of the Vietnamese banking market has undergone many fluctuations, which has had an impact on banking activities, and the fact that many related studies have been carried out, but the answer is still limited and inconsistent, it is necessary to study the impact of the market structure on banking operations in Vietnam. The paper comprehensively examines the impact of market structure on various aspects of bank performance in Vietnam. The study uses three measures of the structure of the banking industry, namely, the total market share of the largest banks, the squared market share of all banks according to the Herfindahl-Hirshchman index, and the Lerner index on market power (inverse bank competition), to ensure the results are not dependent on any specific measure. The paper applies the two-step system generalized method of moments estimator to conduct regression analysis for a sample of 30 banks from 2007 to 2021. All obtained estimates generally show positive effects on bank performance due to greater market power and higher banking concentration. Concretely, more market power and greater concentration improve bank asset quality, management efficiency, bank profitability, and lending capacity. Overall, the findings of this paper all support the bright side of less competition and more concentration, which is essential to derive policy implications related to supervising competitive environments and stimulating consolidated financial systems.
Acknowledgment
This study is part of Thi Mai Phuong Duong’s PhD dissertation at the Ho Chi Minh University of Banking under the supervision of Van Dan Dang.
- Keywords
-
JEL Classification (Paper profile tab)G21, G28
-
References40
-
Tables8
-
Figures0
-
- Table 1. Summary statistics of all variables
- Table 2. Market structure and non-performing loans
- Table 3. Market structure and loan loss provisions
- Table 4. Market structure and bank efficiency by non-interest expenses
- Table 5. Market structure and bank efficiency by operating expenses
- Table 6. Market structure and bank profitability by ROA
- Table 7. Market structure and bank profitability by ROE
- Table 8. Market structure and bank loan growth
-
- Albaity, M., Mallek, R. S., & Noman, A. H. M. (2019). Competition and bank stability in the MENA region: The moderating effect of Islamic versus conventional banks. Emerging Markets Review, 38, 310-325.
- Allen, F., & Gale, D. (2004). Competition and financial stability. Journal of Money, Credit, and Banking, 36(3b), 453-480.
- Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51.
- Bain, J. S. (1951). Relation of profit rate to industry concentration: American manufacturing, 1936–1940. Quarterly Journal of Economics, 65(3), 293-324.
- Beck, T., Demirguc-Kunt, A., & Maksimovic, V. (2004). Bank competition and access to finance: International evidence. Journal of Money, Credit, and Banking, 36(3b), 627-648.
- Berger, A. N., Klapper, L. F., & Turk-Ariss, R. (2009). Bank competition and financial stability. Journal of Financial Services Research, 35(2), 99-118.
- Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
- Boyd, J. H., & De Nicoló, G. (2005). The theory of bank risk taking and competition revisited. Journal of Finance, 60(3), 1329-1343.
- Caminal, R., & Matutes, C. (2002). Market power and banking failures. International Journal of Industrial Organization, 20(9), 1341-1361.
- Carletti, E., & Leonello, A. (2019). Credit market competition and liquidity crises. Review of Finance, 23(5), 855-892.
- Craig, B. R., & Dinger, V. (2013). Deposit market competition, wholesale funding, and bank risk. Journal of Banking & Finance, 37(9), 3605-3622.
- Dang, V. D., & Huynh, J. (2022). Bank funding, market power, and the bank liquidity creation channel of monetary policy. Research in International Business and Finance, 59, 101531.
- Dang, V. D., & Nguyen, H. C. (2022). Banking uncertainty and lending: Does bank competition matter? Journal of Asia Business Studies, 17(4), 741-765.
- Dell’Ariccia, G., & Marquez, R. (2004). Information and bank credit allocation. Journal of Financial Economics, 72(1), 185-214.
- Dietrich, A., & Wanzenried, G. (2014). The determinants of commercial banking profitability in low-, middle-, and high-income countries. Quarterly Review of Economics and Finance, 54(3), 337-354.
- Gan, J. (2004). Banking market structure and financial stability: Evidence from the Texas real estate crisis in the 1980s. Journal of Financial Economics, 73(3), 567-601.
- Haq, M., & Heaney, R. (2012). Factors determining European bank risk. Journal of International Financial Markets, Institutions and Money, 22(4), 696-718.
- Hussain, M., & Bashir, U. (2019). Impact of monetary policy on bank lending: Does market structure matter? International Economic Journal, 33(4), 620-648.
- Huynh, J., & Dang, V. D. (2021). Loan portfolio diversification and bank returns: Do business models and market power matter? Cogent Economics and Finance, 9(1).
- Jeon, J. Q., & Lim, K. K. (2013). Bank competition and financial stability: A comparison of commercial banks and mutual savings banks in Korea. Pacific-Basin Finance Journal, 25, 253-272.
- Kasman, S., & Kasman, A. (2015). Bank competition, concentration and financial stability in the Turkish banking industry. Economic Systems, 39(3), 502-517.
- Keeley, M. C. (1990). Deposit insurance, risk, and market power in banking. American Economic Review, 80(5), 1183-1200.
- Khan, H. H., Ahmed, R. B., & Gee, C. S. (2016). Bank competition and monetary policy transmission through the bank lending channel: Evidence from ASEAN. International Review of Economics and Finance, 44, 19-39.
- Khan, M. A., & Ahmad, W. (2022). Fresh evidence on the relationship between market power and default risk of Indian banks. Finance Research Letters, 46, 102360.
- Koetter, M., Kolari, J. W., & Spierdijk, L. (2012). Enjoying the quiet life under deregulation? Evidence from adjusted lerner indices for U.S. banks. Review of Economics and Statistics, 94(2), 462-480.
- Kupiec, P., Lee, Y., & Rosenfeld, C. (2017). Does bank supervision impact bank loan growth? Journal of Financial Stability, 28, 29-48.
- Lerner, A. P. (1934). The concept of monopoly and the measurement of monopoly power. Review of Economic Studies, 1(3), 157-175.
- Leroy, A., & Lucotte, Y. (2017). Is there a competition-stability trade-off in European banking? Journal of International Financial Markets, Institutions and Money, 46, 199-215.
- Mishkin, F. S. (1999). Financial consolidation: Dangers and opportunities. Journal of Banking and Finance, 23(2), 675-691.
- Nguyen, T. N., Stewart, C., & Matousek, R. (2018). Market structure in the Vietnamese banking system: a non-structural approach. Journal of Financial Regulation and Compliance, 26(1), 103-119.
- Petersen, M. A., & Rajan, R. G. (1995). The effect of credit market competition on lending relationships. Quarterly Journal of Economics, 110(2), 407-443.
- Pruteanu-Podpiera, A., Weill, L., & Schobert, F. (2015). Banking competition and efficiency: A micro-data analysis on the Czech banking industry. In Global Banking Crises and Emerging Markets (pp. 52-74). Palgrave Macmillan.
- Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9(1), 86-136.
- Schaeck, K., & Cihák, M. (2014). Competition, efficiency, and stability in banking. Financial Management, 43(1), 215-241.
- Schaeck, K., Cihak, M., & Wolfe, S. (2009). Are competitive banking systems more stable? Journal of Money, Credit and Banking, 41(4), 711-734.
- Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393-410.
- Tan, Y. (2016). The impacts of risk and competition on bank profitability in China. Journal of International Financial Markets, Institutions and Money, 40, 85-110.
- Tan, Y. (2017). The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry. The North American Journal of Economics and Finance, 42, 89-106.
- Turk Ariss, R. (2010). On the implications of market power in banking: Evidence from developing countries. Journal of Banking and Finance, 34(4), 765-775.
- Yin, H. (2021). The impact of competition and bank market regulation on banks’ cost efficiency. Journal of Multinational Financial Management, 61, 100677.
-
The effect of Lerner Index and income diversification on the general bank stability in Indonesia
Syahyunan , Iskandar Muda ,
Hasan Sakti Siregar ,
Isfenti Sadalia ,
Gerry Chandra
doi: http://dx.doi.org/10.21511/bbs.12(4).2017.05
Banks and Bank Systems Volume 12, 2017 Issue #4 pp. 56-64 Views: 1324 Downloads: 218 TO CITE АНОТАЦІЯThe purpose of this study is to examine the effect of market power and income diversification on the General Bank stability in Indonesia. This research uses a data sample of 20 general banks listed on the Indonesia Stock Exchange for the period of 2011–2014. Data analysis technique used is Multiple Linear Regression. It can be concluded simultaneously that market power and revenue diversification have significant effect on bank stability and, partially, market power has a positive and significant effect on a bank stability. Income diversification has a positive non-significant effect on bank stability.
-
The financial soundness of the Palestinian banking sector: an empirical analysis using the CAMEL system
Mohammed Т. Abusharbeh
doi: http://dx.doi.org/10.21511/bbs.15(1).2020.09
Banks and Bank Systems Volume 15, 2020 Issue #1 pp. 85-97 Views: 1212 Downloads: 410 TO CITE АНОТАЦІЯThe purpose of this article is to evaluate the financial soundness of commercial banks listed on the Palestine Exchange using the CAMEL rating system. A content analysis, composite rating, and a one sample t-test are applied to a sample of six local banks operating in Palestine. Secondary data were obtained from the financial statements of the banks for the period of 2007–2017 in order to conduct the research and evaluate their financial performance. The empirical test has shown that Palestinian banks adhere to the Basel Committee standards in terms of capital adequacy and that they display stability in terms of profitability and liquidity. However, the paper concludes that the operational efficiency of the banks being evaluated is “fairly managed”. Finally, the findings indicate significant differences amongst Palestinian banks in terms of performance, assessed using the CAMEL rating system. This paper suggests that the listed Palestinian banks should focus on long-term investments rather than short-term ones, and monitor their risk management practices to increase their profits and move towards sustainability and growth.
-
Risk management and performance of deposit money banks in Nigeria: A re-examination
Babatunde Moses Ololade ,
Rafiu Oyesola Salawu ,
Olaide Olufolayemi Olatunji
doi: http://dx.doi.org/10.21511/bbs.18(2).2023.10
Banks and Bank Systems Volume 18, 2023 Issue #2 pp. 113-126 Views: 945 Downloads: 425 TO CITE АНОТАЦІЯRisks inherent in banking businesses should be managed to prevent financial losses to the sector’s stakeholders and negative externalities to the global economy. To this end, this study examines the effect of risk management on the performance of deposit money banks in Nigeria. A sample of eight (8) deposit money banks with international authorization are purposively selected out of 12 deposit money banks due to data availability. Panel data analysis techniques were adopted to analyze the secondary data that were obtained from the annual reports of banks. Findings based on the disaggregated model results reveal that both liquidity and capital risk variables exert a negative but insignificant effect on performance. However, credit risk drives performance of the internationally authorized banks positively and significantly. Furthermore, Management quality (MQ) is the only control variable that has a significant influence on the performance of the selected deposit money banks. The study concludes that credit risk and management quality significantly and positively drive performance among the financial entities.
