Evaluating the performance of banking industry using lowe index - Efficiency and productivity of commercial banks in Vietnam

Abstract

The aim of this study is to provide a better understanding of recent changes in the Vietnamese banking industry using Lowe index with R software. This research shows how Vietnamese commercial bank’s efficiency and productivity levels have been changing during the period 2015 - 2019. The study also describes the change of scale efficiency and mix efficiency in the sample period. To calculate productivity and efficiency, the study uses Lowe index, which is multiplicative-complete economically ideal in the index theory. The result reveals that the total factor productivity of Vietnamese commercial banks increases in 2015 – 2018, but it decreases in 2018 – 2019, which is opposite the change of total factor productivity efficiency. The research also shows the mix and scale inefficiency is the main cause of the productive inefficiency.