COMPETITION, RISK AND PROFITABILITY IN BANKING SYSTEM — EVIDENCE FROM VIETNAM

The development in information technology results in a significant increase in bank competition. The question of whether increased competition improves bank profitability and risk reduction is important in many aspects. This paper analyzes the impact of competition on profitability and risk in the c...

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Bibliographic Details
Published in:Singapore economic review 2020-12, Vol.65 (6), p.1491-1505
Main Authors: NGUYEN, THI HIEN, TRAN, HA GIANG
Format: Article
Language:English
Subjects:
Bank management
Banking industry
Banking system
Banks
Banks (Finance)
Commercial banks
Competition
Economic theory
Information technology
Profitability
Risk reduction
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Summary:The development in information technology results in a significant increase in bank competition. The question of whether increased competition improves bank profitability and risk reduction is important in many aspects. This paper analyzes the impact of competition on profitability and risk in the context of Vietnam using OLS estimator on data set of 37 Vietnamese commercial banks. The main results present that banks with a higher competition index tend to have higher profitability which is measured by ROE and NIM. In addition, our empirical results also show that banks tend to take on more risk when facing increased competition.
ISSN:0217-5908
1793-6837
DOI:10.1142/S0217590820500137