Concentration and efficiency in the Vietnamese banking system between 1999 and 2009: A structural model approach

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.