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Ownership Structure and Efficiency of Banking Industry in China and Vietnam - A Political View

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  • Manh-Trung Phung
  • Cheng-Ping Cheng
  • Chen-Yu Kao

Abstract

Ownership structure and the performance of banking industry have been long considered as a matter of debate. Despite of differences in perspective, both ¡°development view¡± and ¡°politics view¡± approve the desire of governments to control financial institutions through their ownership structure. This paper adopts the two-stage stochastic frontier analysis (SFA) to examine the relation between ownership structure and bank¡¯s efficiency in two long historic communism countries ¨C China and Vietnam with the consideration of some political factors. Our result consistently indicates that banks with foreign-controlled shareholders in both countries can increase their efficiency significantly. Additionally, we uncover an interesting phenomenon that is during the election years, state-owned banks in China and Vietnam outperform the others. These banks are also the most beneficiaries from the economic expansion. Finally, meta-frontier is utilized to compare the relative performance of banking industry in these two countries.

Suggested Citation

  • Manh-Trung Phung & Cheng-Ping Cheng & Chen-Yu Kao, 2018. "Ownership Structure and Efficiency of Banking Industry in China and Vietnam - A Political View," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(3), pages 61-74, July.
    • Handle: RePEc:jfr:ijfr11:v:9:y:2018:i:3:p:61-74
    DOI: 10.5430/ijfr.v9n3p61
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    References listed on IDEAS

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    1. Subal Kumbhakar & Dan Wang, 2007. "Economic reforms, efficiency and productivity in Chinese banking," Journal of Regulatory Economics, Springer, vol. 32(2), pages 105-129, October.
    2. Beck, Thorsten & Crivelli, Juan Miguel & Summerhill, William, 2005. "State bank transformation in Brazil - choices and consequences," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2223-2257, August.
    3. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca & Parmendra Sharma, 2016. "Bank reforms and efficiency in Vietnamese banks: evidence based on SFA and DEA," Applied Economics, Taylor & Francis Journals, vol. 48(30), pages 2822-2835, June.
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