tailieunhanh - Income diversification and bank efficiency in Vietnam

Income diversification and bank efficiency in Vietnam. This study uses the DEA (Data Envelopment Analysis) method to estimate the technical efficiency index of 34 Vietnamese commercial banks in the period 2007-2015, and then it analyzes the impact of income diversification on the operational efficiency of Vietnamese commercial banks through a censored regression model - the Tobit regression model. | Journal of Economics and Development, , , December 2017, pp. 52-67 ISSN 1859 0020 Income Diversification and Bank Efficiency in Vietnam Nguyen Minh Sang Banking University of Ho Chi Minh City, Vietnam Email: sangnm@ Abstract This study uses the DEA (Data Envelopment Analysis) method to estimate the technical efficiency index of 34 Vietnamese commercial banks in the period 2007-2015, and then it analyzes the impact of income diversification on the operational efficiency of Vietnamese commercial banks through a censored regression model - the Tobit regression model. Research results indicate that income diversification has positive effects on the operational efficiency of Vietnamese commercial banks in the research period. Based on study results, in this research some recommendations forpolicy are given to enhance the operational efficiency of Vietnam’s commercial banking system. Keywords: Bank efficiency; commercial bank; income diversification. Journal of Economics and Development 52 Vol. 19, , December 2017 1. Introduction period 2007-2013 according to SGMM. The result indicated that income diversification had a positive effect on the profitability of Vietnamese commercial banks. Mercieca, Schaeck and Wolfe (2007) proposed that diversification in the banking sector was done in three dimensions: (i) Product lines and services diversification; (ii) Diversification of geographical location, and (iii) Diversification thanks to a combination of product lines, services, and geographical location. Income diversification of commercial banks was associated with the diversification of business activities and the gradual reduction of the income proportion from traditional credit operations. According to the Modern Portfolio Theory (MPT) of Markowitz in 1952, portfolio diversification would help investors or banks minimize risks or maximize profits in the same portfolio risk case. Lam Chi Dung et al. (2015) analyzed the impact of income from