The effect of mergers and acquisitions on the efficiency of Vietnam banking system during the restructuring period

Abstract

Since 2011, the Vietnamese banking system has performed many M&A deals. Some small banks which had weak competitiveness and experienced operating activities risk were on the verge of bankruptcy, and had been acquired by potential financial institutions. Although M&A transactions are known for numerous advantages which are brought back for banking industry, most banks still have not actively participated. Therefore, gaining more information about how M&A activities changed our banking system is essential for providing suitable implications and developments for the future. This report first aims to investigate the efficiency level of 30 Vietnamese commercial banks during 2011–2019 period under intermediation and operating approach using Bootstrap Data Envelopment Analysis. Next, applying Robust Truncated Regression, this paper shows that M&As negatively affect banking efficiency. Meanwhile, a set of explanatory variables following CAMELS standards can contribute to increase the efficiency level.

Keywords:

• banking efficiency
• M&A
• CAMELS standards
• bootstrap DEA scores

Public Interest Statement

This paper is a part of the research project investigating the efficiency of the Vietnamese banking system during the restructuring period. By investigating the bootstrap efficiency scores of Vietnamese banksand the effect of M&A on efficiency scores, this paper will help the State Bank of Vietnam guide the banking system to operate more efficiently during the restructuring period.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Phuong Anh Nguyen

Phuong Anh Nguyen is a researcher and lecturer in the Department of Finance and Banking at the International University, Vietnam National University of Ho Chi Minh City. Her research interests include bank efficiency, bank risk management, control and optimization. Her research works have been published in international journals such as Applied Economics, Journal of Optimization Theory and Application, SIAM Journal of Control and Optimization.

Thi Thanh Thuy Nguyen was a research assistant at the International University, Vietnam National University of Ho Chi Minh City, Vietnam. Her research interests include bank efficiency and bank risk management.

Thi Thanh Thuy Nguyen

Phuong Anh Nguyen is a researcher and lecturer in the Department of Finance and Banking at the International University, Vietnam National University of Ho Chi Minh City. Her research interests include bank efficiency, bank risk management, control and optimization. Her research works have been published in international journals such as Applied Economics, Journal of Optimization Theory and Application, SIAM Journal of Control and Optimization.

Thi Thanh Thuy Nguyen was a research assistant at the International University, Vietnam National University of Ho Chi Minh City, Vietnam. Her research interests include bank efficiency and bank risk management.