Evaluating the efficiency and productivity of Vietnamese commercial banks: A data envelopment analysis and Malmquist index
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Abstract
Abstract. This paper provides a new evidence on the performance of twenty Vietnamese commercial banks over the period 2007-2010. The study used Data Envelopment Analysis to analyze the efficiency and productivity change of Vietnamese commercial banks. The results show that the efficiency ofVietnam commercial banks increased from 0.7 in 2007 to 0.818 in 2010. However, the results suggest that Vietnamese banks suffer slight inefficiencies during the global financial crisis in 2008. In addition, the results show the average annual growth of the Malmquist index 8.8 percent over the study period despite having dropped by 24.9 percent in 2009. These findings can help bank managers and government to understand banks’ efficiency performance and the underlying reasons of inefficiency.
Keywords: Bank efficiency, data envelopment analysis (DEA), Malmquist index, Vietnam.References
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Xiaogang Chen, Michael Skully, Kym Brown (2005), “Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993-2000”, China Economic Review 16 (2005) 229-245.
[2] Banker, R. D., A. Charmens, and W. W. Cooper (1984), “Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis”, Management Science. 30, pp. 1078-1092.
[3] Berger, A. N. and D. B. Humphrey (1997), “Efficiency of Financial Institutions: International Survey and Directions for Future Research”, European Journal of Operational Research, 98, pp. 175-212.
[4] Cevdet A. Denizer and Mustafa Dinc (2000), Measuring banking efficiency in the Pre- and Post-liberalization environment: Evidence from the Turkish banking system, George Washington University.
[5] Charnes, A., W. W. Cooper, and E. Rhodes (1978), “Measuring the Efficiency, of Decision Making Units”, European Journal of Operational Research, 2, pp. 429-444.
[6] Coelli, T. (1996), “A guide to DEAP version 2.1: A data envelopment analysis (computer) program”, CEPA Working paper, University of New England, http://www.une.edu.au/econometrics/cepawp.htm.
[7] E. Elysiani and S. Mehdian. (1990), “A non-parametric approach to measurement of efficiency and technological change: The case of large U.S banks“, Journal of Financial Services Research, 157-68.
[8] Farrell, M. (1957), “The measurement of productive efficiency”, Journal of the Royal Statistical Society. Series A (General) 120(3), 253-290.
[9] Fare, R., Grosskopf, S., Norris, M. and Zhang, Z. (1994), “Productivity growth, technical progress, and efficiency change in industrialized countries”, The American Economic Review 84(1), 66-83.
[10] Internaltional Monetar Fund (2010), IMF country report.
[11] Kablan (2010), “Banking Efficiency and Financial Development in Sub-Saharan Africa”, IMF Working paper, WP/10/136.
[12] Matthews, C. and Tripe, D. (2002), Banking efficiency in Papua New Guinea, Centre for banking studies, Massey University.
[13] Ngo, D. T. (2010), Evaluating Vietnamese Commercial Banks Using Data Envelopment Analysis Approach (Vietnamese). SSRN eLibrary.
[14] Nguyen, V. H. (2007), Measuring Efficiency Of Vietnamese Commercial Banks: An Application Of Data Envelopment Analysis (DEA). In K. M. Nguyen and T. L. Giang (Eds.), Technical Efficiency and Productivity Growth in Vietnam (pp. 11). Hanoi: Publishing House of Social Labour.
[15] Nguyen, X. Q. and Bruno De Borger (2008), “Bootstrapping efficiency and Malmquist productivity indices: An application to Vietnamese commercial banks”, Asia-Pacific Productivity Conference 2008.
[16] Sealey, C. and Lindley, J. (1977), “Inputs, outputs and a theory of production and cost at depository financial institutions”, Journal of Finance 32, 1251-1266.
Xiaogang Chen, Michael Skully, Kym Brown (2005), “Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993-2000”, China Economic Review 16 (2005) 229-245.