Factors Affecting the Competitive Capacity of Commercial Banks: A Critical Analysis in an Emerging Economy

Kieu Oanh Dao, Le Kieu, Pham Thuy Tu and V.C. Nguyen

No 8mz2y, OSF Preprints from Center for Open Science

Abstract: This research was conducted to investigate the factors influencing the commercial bank’s competitive capacity in an emerging country. Data were collected from the domestic-owned commercial banks and foreign-owned commercial banks listed on Vietnam’s Stock Exchange over the period of nine years from 2010 to 2018. Three statistic approaches were employed to address econometrics issues and to improve the accuracy of the regression coefficients: Pooled Ordinary Least Square (Pooled OLS), Random Effects Model (REM), and Fixed Effects Model (FEM). To correct the diagnostics and endogeneity in the model, the study uses Generalized Least Square (GLS) and Generalized Method of Moments (GMM). In order to account for the degree of competitive capacity we use Lerner index. Results demonstrate that the impact of bank-specific characteristics on market power in banks is statistically significant, and there are substantial distinguishments of economic consideration among these factors. In addition, a bank with a higher level of competitive capacity in the previous year will outstandingly generate competitive capacity in the current year. Another possibility, a greater level foreign investment into the banks in the host country could further encourage competitive capacity in the banking system. Finally, economic growth rate has no impact on competitive capacity at a significant level of 5% while a positive effect from inflation on bank’s market power could be found.

Date: 2020-07-06
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac, nep-sea and nep-tra
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:8mz2y

DOI: 10.31219/osf.io/8mz2y

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