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

Manh-Trung Phung, Cheng-Ping Cheng and Chen-Yu Kao

International Journal of Financial Research, 2018, vol. 9, issue 3, 61-74

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.

Keywords: ownership; politics; schochastic frontier; cost efficiency (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:9:y:2018:i:3:p:61-74

DOI: 10.5430/ijfr.v9n3p61

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