The analysis of technical efficiency of Vietnamese commercial banks in 2007 - 2012 - An application of Dea and Tobit regression model

Abstract

This paper explores the efficiency of 21 commercial banks in Vietnam using the nonparametric data envelopment approach (DEA) and Tobit regression. The results indicate that efficiency has significantly declined over the period 2007-2012 meaning Vietnamese banking system was experiencing a volatile period with many difficulties and challenges while there was not enough professional strategy to solve the problem. In line with the established literature on emerging markets and globalization, foreign banks appear to be strong competitors for the domestic counterparts. However, state-owned banks exhibited greater efficiency than our local private sector peers. The coefficient claimed that ETA had negative impact while LDR had positive impact on the operational efficiency of the banks. The study suggests maintaining the ETA ratio while trying to control the LDR at an appropriate level may improve the technical efficiency