Measuring banking efficiency in Vietnam: parametric and non-parametric methods

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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.

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    • Table 1. Banks in the research sample
    • Table 2. Input and output variables in the model
    • Table 3. Results of calculating the business performance of banks in model 1
    • Table 4. Results of calculating business performance of banks in model 2
    • Table 5. Tobit regression result
    • Table 6. Correlation between parametric and non-parametric methods