Concentration and efficiency in the Vietnamese banking system between 1999 and 2009

Abstract

Purpose The purpose of this paper is to examine the degree of concentration and efficiency in the Vietnamese banking system using the structural model. Design/methodology/approach The authors apply the concentration ratio (CR), Herfindahl‐Hirschman Index (HHI) and concentration‐profitability model based upon the Structure‐Conduct‐Performance (SCP) and Efficiency Hypothesis (EH) approaches to examine 48 Vietnamese commercial banks over the period 1999‐2009. Findings The authors' empirical results show that the Vietnamese banking industry has become substantially less concentrated; however, large commercial banks still dominate the whole banking system. Further, their results do not support either the traditional Structure‐Conduct‐Performance or the Efficiency Hypothesis. Practical implications The State Bank of Vietnam needs to have policies for restructuring the system and promoting competition in the banking sector of Vietnam. Originality/value This is the first such study of the Vietnamese banking system.