Cost Efficiency of the Banking Sector in Vietnam: A Bayesian Stochastic Frontier Approach with Regularity Constraints |
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| Authors: | Ha Thu Vu Sean Turnell |
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| Institution: | 1. Department of Economics, Macquarie University, Sydney, NSW 2109, Australia;2. The authors thank Dr Daehoon Nahm for his valuable comments on an earlier version of this paper which was a chapter in Ha T. Vu's PhD thesis. We also thank participants at the XI European Workshop on Efficiency and Productivity Analysis in Pisa, Italy, June 2009, and the anonymous referee for their constructive comments and feedback to improve the quality of the paper. |
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| Abstract: | This paper investigates the cost efficiency of the Vietnamese banking industry. To obtain an appropriate estimate of cost efficiency, monotonicity and concavity constraints are incorporated in the estimation of the cost frontier using the Bayesian approach. Overall, the level of cost efficiency of Vietnam's banking sector is relatively high, around 87 percent. The findings reveal minor and insignificant differences in the cost efficiency of different groups of banks classified by ownership. Furthermore, throughout the estimation period, the industry faced a slight decrease in cost efficiency. This could be explained by increases in the costs of managing diverse activities, the enlargement of branch networks and the upgrading of the banking technology platform. |
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| Keywords: | Bayesian estimation cost efficiency regulatory constraints Vietnamese banking industry C11 D24 G21 |
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