Cluster Analysis of Vietnamese Banks on Efficiency and Performance

Purpose: This paper utilizes an amalgamation of cluster analysis and non-parametric approach to calculate the performance and efficiency index of banks in Vietnam, and grouping them accordingly. Design/methodology/approach: This requirement has inspired this cluster analysis, a classification technique, to categorize 23 listed Vietnamese banks, according to their performance and efficiency. Furthermore, the Data Envelopment Analysis (DEA) was used to assess the efficiency of these institutions, while their performance is measured using returns on equity (ROE), and return on assets (ROA).Findings: The authors discover that banks in the sample may be organically divided into four groups based only on information available in the data. The results show that Vietnam's banking industry was relatively efficient over the study period, with an annual efficiency score consistently above 0.9.Originality: Today, the role of the banking industry is becoming increasingly large in the overall economy of each country. Therefore, identifying and separating well-performed and efficient banks from poorly performed ones are crucial tasks in managing and preventing potential banking failure, especially in the context that the world is still suffering from negative impacts of COVID - 19 and political instability.Implication: The significant discrepancy between banks’ operational profitability and capitalization is also a major contributing factor to the overall risk of Vietnam’s banking system. Therefore, identifying and separating well performed and efficient banks from poorly performed ones are a crucial task in managing and preventing potential banking failure