Management Behaviour in Vietnamese Commercial Banks
Embargoed until: 2018-12-01
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This study identifies managerial behaviour in Vietnamese banks between the years 2000 and 2014, based on the managerial framework of banks, as identified by Rossi et al. (2009). This framework is built on the interrelationships between efficiency, risk, capital and diversification. This study uses the Z-score to measure insolvency risk, the SFA to estimate cost efficiency, the ratio of total equity to total assets to capture bank capital and the HHI index to measure the diversification of revenue and earning assets. The results from the 3SLS estimator indicate that revenue diversification has an insignificant impact on insolvency risk, capital ratio and cost efficiency, but earning assets diversification has a negative effect on these three variables, supporting ‘classical diversification’, ‘economic capital’ and ‘monitoring’ behaviours. Moreover, a decline in cost efficiency leads to a rise in insolvency risk, implying ‘bad management’ behaviour; an increase in risk results in a reduction in cost efficiency, indicating ‘bad luck’ behaviour; and a reduction in capital ratio in the poorly capitalised banks leads to a growth in risk, suggesting ‘moral hazard’ behaviour. The results remain strongly robust when using an alternative risk measurement (the loan loss provision ratio) and an alternative SFA model.
Australian Economic Papers
© 2016 University of Adelaide and Flinders University and Blackwell Publishing Asia Pty Ltd. This is the peer reviewed version of the following article: Management Behaviour in Vietnamese Commercial Banks, Australian Economic Papers, Vol. 55 (4), pp. 345–367, 2016 which has been published in final form at 10.1111/1467-8454.12085. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving (http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms)
Business and Management not elsewhere classified