Advertisement

Bank Competition and Financial Stability: Empirical Evidence in Vietnam

Conference paper
Part of the Studies in Computational Intelligence book series (SCI, volume 760)

Abstract

The relationship between competition and stability of the commercial banking system has been at the heart of scholarly and policy debates over the past two decades, especially since the 2008 financial crisis. In this study, we focus on analysing the relationship between competition and stability with 24 commercial banks in Vietnam for the period 2008–2016. Our study results show that increasing competition helps Vietnam’s banking system become more stable. However, the relationship between competition and stability is nonlinear. The results of our study also show the impact of competition on the stability of Vietnam’s banking system in a crisis situation. In the context of financial crisis, the instability and NPL of Vietnam commercial banks are increased. At the same time, increased competition can cause instability for the commercial banking system in Vietnam.

References

  1. Allen, F., Gale, D.: Financial contagion. J. Polit. Econ. 108, 1–33 (2000)CrossRefGoogle Scholar
  2. Allen, F., Gale, D.: Competition and financial stability. J. Money Credit Bank. 36, 453–480 (2004)CrossRefGoogle Scholar
  3. Arellano, M., Bond, S.: Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev. Econ. Stud. 58(2), 277–297 (1991)CrossRefMATHGoogle Scholar
  4. Beck, T.: Bank Competition and Financial Stability: Friends or Foes? Policy Research Working Paper No. 4656, World Bank (2008)Google Scholar
  5. Beck, T., Demirguc-Kunt, A., Levine, R.: Bank concentration, competition, and crises: first results. J. Bank. Financ. 30, 1581–1603 (2006)CrossRefGoogle Scholar
  6. Berger, A., Klapper, L., Turk-Ariss, R.: Bank competition and financial stability. J. Financ. Serv. Res. 35, 99–118 (2009)CrossRefGoogle Scholar
  7. Berger, A., Klapper, L., Turk-Ariss, R.: Bank Competition and Financial Stability, World Bank Policy Research Working Paper 4696 (2008)Google Scholar
  8. Boot, A., Greenbaum, S.: Bank regulation, reputation and rents: theory and policy implications. In: Mayer, C., Vives, X. (eds.) Capital Markets and Financial Intermediation, pp. 262–285. Cambridge University Press, Cambridge (1993)CrossRefGoogle Scholar
  9. Boyd, J.H., De Nicolo, G., Smith, B.D.: Crises in competitive versus monopolistic banking systems. J. Money Credit Bank. 36, 487–506 (2004)CrossRefGoogle Scholar
  10. Boyd, J.H., De Nicolo, G.: The theory of bank risk-taking and competition revisited. J. Financ. 60, 1329–1343 (2005)CrossRefGoogle Scholar
  11. Boyd, J.H., De Nicolo, G., Jalal, A.M.: Bank risk taking and competition revisited: New theory and evidence. IMF working paper, WP/06/297 (2006)Google Scholar
  12. Boyd, J.H., Graham, S.L.: Risk, regulation, and bank holding company expansion into nonbanking. Res. Depart. Fed. Reserv. Bank Minneap. 10(2), 2–17 (1986)Google Scholar
  13. Boyd, J.H., Graham, S.L., Hewitt, R.S.: Bank holding company mergers with nonbank financial firms: effects on the risk of failure. J. Bank. Financ. 17(1), 43–63 (1993)CrossRefGoogle Scholar
  14. Caminal, R., Matutes, C.: Market power and bank failures. Int. J. Ind. Organ. 20, 1341–1361 (2002)CrossRefGoogle Scholar
  15. Carletti, E., Hartmann, P.: Competition and financial stability: what’s special about banking? In: Mizen, P. (ed.) Monetary History, Exchange Rates and Financial Markets: Essays in Honour of Charles Goodhart, vol. 2. Edward Elgar, Cheltenham (2003)Google Scholar
  16. De Nicolo, G., Loukoianova, E.: Bank Ownership, Market Structure, and Risk. IMF Working paper, WP/07/215 (2006)Google Scholar
  17. Carletti, E.: Competition and regulation in banking. In: Boot, A.W.A., Thakor, A. (eds.) Handbook of Financial Intermediation and Banking. Elsevier, Amsterdam (2008)Google Scholar
  18. Fernández de Guevara, J., Maudos, J., Perez, F.: Market power in European banking sectors. J. Financ. Serv. Res. 27, 109–137 (2005)CrossRefGoogle Scholar
  19. (Maggie) Fu, X., (Rebecca) Lin, Y., Molyneux, P.: Bank competition and financial stability in Asia Pacific. J. Bank. Finan. 38(1), 64–77. https://doi.org/10.1016/j.jbankfin.2013.09.012 (2013)
  20. (Maggie) Fu, X., (Rebecca) Lin, Y., Molyneux, P.: Bank competition and financial stability in Asia Pacific. J. Bank. Financ. 38(issue C), 64–77 (2014)Google Scholar
  21. Gambacorta, L.: Inside the bank lending channel. Eur. Econ. Rev. 49(7), 1737–1759 (2005)CrossRefGoogle Scholar
  22. Gunji, H., Yuan, Y.: Bank profitability and the bank lending channel: evidence from China. J. Asian Econ. 21(2), 129–144 (2010)CrossRefGoogle Scholar
  23. Hannan, T.H., Hanweck, G.A.: Bank insolvency risk and the market for large certificates of deposit. J. Money Credit Bank. 20(2), 203–211 (1988)CrossRefGoogle Scholar
  24. Hellmann, T., Murdock, K., Stiglitz, J.: Liberalization, moral hazard in banking, and prudential regulation: are capital requirements enough? Am. Econ. Rev. 90, 147–165 (2000)CrossRefGoogle Scholar
  25. Jimenez, G., Lopez, J., Saurina, J.: How does Competition Impact Bank Risk Taking? Banco de Espana Working Papers 1005 (2007)Google Scholar
  26. Keeley, M.: Deposit insurance, risk, and market power in banking. Am. Econ. Rev. 80, 1183–1200 (1990)Google Scholar
  27. Laeven, L., Levine, R.: Bank governance, regulation and risk taking. J. Finan. Econ. 93, 259–275 (2009)CrossRefGoogle Scholar
  28. Liu, H., Molyneux, P., Wilson, J.: Competition and Stability in European Banking: A Regional Analysis. Working Paper No. BBSWP/10/019. School of Management, University of St. Andrews (2010)Google Scholar
  29. Marcus, A.J.: Deregulation and bank financial policy. J. Bank. Financ. 8, 557–565 (1984)CrossRefGoogle Scholar
  30. Martinez-Miera, D., Repullo, R.: Does competition reduce the risk of bank failure? Rev. Financ. Stud. 23, 3638–3664 (2010)CrossRefGoogle Scholar
  31. Maudos, J., Solis, L.: The determinants of net interest income in the Mexican banking system: an integrated model. J. Bank. Financ. 33, 1920–1931 (2009)CrossRefGoogle Scholar
  32. Mishkin, F.S.: Financial consolidation: dangers and opportunities. J. Bank. Financ. 23, 675–691 (1999)CrossRefGoogle Scholar
  33. Fernández, R.O., Garza-García, J.G.: The Relationship between Bank Competition and Financial Stability: A Case Study of the Mexican Banking Industry. Working Paper 03.12 (2015)Google Scholar
  34. Schaeck, K., Cihak, M., Wolfe, S.: Are More Competitive Banking Systems More Stable? IMF Working Paper WP/06/143 (2006)Google Scholar
  35. Schaeck, K., Cihak, M.: How does competition affect efficiency and soundness in banking? New empirical evidence. Working Paper No. 932, European Central Bank (2008)Google Scholar
  36. Turk-Ariss, R.: On the implications of market power in banking: evidence from developing countries. J. Bank. Financ. 34(4), 765–775 (2010)CrossRefGoogle Scholar
  37. Vives, X.: Competition and Stability in Banking. IESE Working Paper 852 (2010)Google Scholar
  38. Uhde, A., Heimeshoff, U.: Consolidation in banking and financial stability in Europe: empirical evidence. J. Bank. Finan. 33(7), 1299–1311 (2009)CrossRefGoogle Scholar

Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.Banking University of Ho Chi Minh CityHo Chi Minh CityVietnam
  2. 2.HCMC University of Food IndustryHo Chi Minh CityVietnam

Personalised recommendations