Factors Affecting the Competitive Capacity of Commercial Banks: A Critical Analysis in an Emerging Economy

Abstract

<jats:p>This research was conducted to investigate the factors influencing the commercial bank’s competitive capacity in an emerging country. Data were collected from the domestic-owned commercial banks and foreign-owned commercial banks listed on Vietnam’s Stock Exchange over the period of nine years from 2010 to 2018. Three statistic approaches were employed to address econometrics issues and to improve the accuracy of the regression coefficients: Pooled Ordinary Least Square (Pooled OLS), Random Effects Model (REM), and Fixed Effects Model (FEM). To correct the diagnostics and endogeneity in the model, the study uses Generalized Least Square (GLS) and Generalized Method of Moments (GMM). In order to account for the degree of competitive capacity we use Lerner index. Results demonstrate that the impact of bank-specific characteristics on market power in banks is statistically significant, and there are substantial distinguishments of economic consideration among these factors. In addition, a bank with a higher level of competitive capacity in the previous year will outstandingly generate competitive capacity in the current year. Another possibility, a greater level foreign investment into the banks in the host country could further encourage competitive capacity in the banking system. Finally, economic growth rate has no impact on competitive capacity at a significant level of 5% while a positive effect from inflation on bank’s market power could be found.</jats:p>

Factors affecting non-performing loans of commercial banks: The role of bank performance and credit growth

“…At the same time, banks also tried to introduce many practices to regulate standard rules for limiting bad debts in the credit extension process. Bad debts will have an impact on liquidity risk in commercial banks, lower operating profit, and bank customer credibility (Dao, Pham, & Nguyen, 2020 Nguyen). Non-performing loans (NPLs) are described as the "blood clot" of the economic system, since bad debt puts banks in danger of bankruptcy, as some conventional scholars have done in their work on bankruptcy stimuli (Barr & Siems, 1993; Demirgue-Kunt, 1989; Kamran, Haseeb, V. C. Nguyen, & T. T. Nguyen, 2020).…”

Factors affecting non-performing loans of commercial banks: the role of bank performance and credit growth

“…At the same time, banks also tried to introduce many practices to regulate standard rules for limiting bad debts in the credit extension process. Bad debts will have an impact on liquidity risk in commercial banks, lower operating profit, and bank customer credibility (Dao, Pham, & Nguyen, 2020; H. T. Nguyen, Tran, Le, & T. H. Y. Nguyen; T. H. Nguyen, T. H. Y. Nguyen, Le, Vo, & T. V. Nguyen). Non-performing loans (NPLs) are described as the "blood clot" of the economic system, since bad debt puts banks in danger of bankruptcy, as some conventional scholars have done in their work on bankruptcy stimuli (Barr & Siems, 1993;Demirgue-Kunt, 1989; Kamran, Haseeb, V. C. Nguyen, & T. T. Nguyen, 2020).…”

Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach

“…Vietnam's economy is growing strongly and integrating deeply into the world economy with the trade balance being improved recently after a long period of deficit, bad debts in the banking system, and instable economic policies including the exchange rate policy (Nguyen and Do, 2020;Dao et al, 2020). In this case, the question "is the current exchange rate suitable?"…”