Efficiency of the banking system in Vietnam under financial liberalization : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Banking Studies at Massey University, Manawatu Campus, New Zealand
The thesis reviews the (triangular) relationship between financial liberalization, economic
growth, and banking development. It points out the causality effect where financial
liberalization could improve the efficiency of the banking sector, but on the other hand, it
also could lead to instability in the banking system. The recent Global Financial Crisis
raised questions as to how and at what level financial liberalization could be done so that
for banking development, improvements are achieved but instabilities are avoided. The
thesis answers these questions employing a new sample (the Vietnamese banking system),
covering a long period (1990-2010), and consistently applying different approaches and
models. Three different approaches are used, namely ratio analysis, stochastic frontier
analysis (SFA), and data envelopment analysis (DEA).
Our findings suggest that the performance of the Vietnamese banking system generally
improved during 1990-2002, worsened during 2003-2008, and recovered in 2009-2010.
However, there was no statistical association between this performance and the regional or
global financial crises in 1997 and 2007/08. Although future studies are needed (since our
sample was small and thus, the results may not be accurate), there was evidence that the
state-owned commercial banks were less efficient than the joint-stock commercial banks
and hence, equitization of the state-owned commercial banks should be speeded up in order
to transform their ownership, reducing their size, and improving their performance.
There are consistencies between these approaches in terms of defining the efficiency
scores, trends, and best and worst performers. Our findings also suggested that the timetrend-
DEA, as well as the Fisher Index-DEA models, could be an alternative to the panel-
DEA and Malmquist Index-DEA models since they could provide additional information
on the performance measures, especially in case of data limitation. However, we could not
find consistent results between the ratio analysis model and the ratio-based DEA ones
(Panel- and Malmquist Index-DEA) in terms of scores, trends, and determinants.