The cost efficiency of Vietnamese banks – the difference between DEA and SFA
Purpose – The paper aims to enrich previous findings for an emerging banking industry such as Vietnam, reporting the difference between the parametric and nonparametric methods when measuring cost efficiency. The purpose of the study is to assess the consistency in issuing policies to improve the co...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2020-05-01
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| Series: | Journal of Economics and Development |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JED-12-2019-0075/full/pdf?title=the-cost-efficiency-of-vietnamese-banks-the-difference-between-dea-and-sfa |
| _version_ | 1798036078867775488 |
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| author | Phong Hoang Nguyen Duyen Thi Bich Pham |
| author_facet | Phong Hoang Nguyen Duyen Thi Bich Pham |
| author_sort | Phong Hoang Nguyen |
| collection | DOAJ |
| description | Purpose – The paper aims to enrich previous findings for an emerging banking industry such as Vietnam, reporting the difference between the parametric and nonparametric methods when measuring cost efficiency. The purpose of the study is to assess the consistency in issuing policies to improve the cost efficiency of Vietnamese commercial banks. Design/methodology/approach – The cost efficiency of banks is assessed through the data envelopment analysis (DEA) and the stochastic frontier analysis (SFA). Next, five tests are conducted in succession to analyze the differences in cost efficiency measured by these two methods, including the distribution, the rankings, the identification of the best and worst banks, the time consistency and the determinants of efficiency frontier. The data are collected from the annual financial statements of Vietnamese banks during 2005–2017. Findings – The results show that the cost efficiency obtained under the SFA models is more consistent than under the DEA models. However, the DEA-based efficiency scores are more similar in ranking order and stability over time. The inconsistency in efficiency characteristics under two different methods reminds policy makers and bank administrators to compare and select the appropriate efficiency frontier measure for each stage and specific economic conditions. Originality/value – This paper shows the need to control for heterogeneity over banking groups and time as well as for random noise and outliers when measuring the cost efficiency. |
| first_indexed | 2024-04-11T21:07:24Z |
| format | Article |
| id | doaj.art-01822dc9a22a4e34a3d03999866a0f62 |
| institution | Directory Open Access Journal |
| issn | 1859-0020 2632-5330 |
| language | English |
| last_indexed | 2024-04-11T21:07:24Z |
| publishDate | 2020-05-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Journal of Economics and Development |
| spelling | doaj.art-01822dc9a22a4e34a3d03999866a0f622022-12-22T04:03:11ZengEmerald PublishingJournal of Economics and Development1859-00202632-53302020-05-0122220922710.1108/JED-12-2019-0075644624The cost efficiency of Vietnamese banks – the difference between DEA and SFAPhong Hoang Nguyen0Duyen Thi Bich Pham1Quy Nhon University, Quy Nhon, VietnamQuy Nhon University, Quy Nhon, VietnamPurpose – The paper aims to enrich previous findings for an emerging banking industry such as Vietnam, reporting the difference between the parametric and nonparametric methods when measuring cost efficiency. The purpose of the study is to assess the consistency in issuing policies to improve the cost efficiency of Vietnamese commercial banks. Design/methodology/approach – The cost efficiency of banks is assessed through the data envelopment analysis (DEA) and the stochastic frontier analysis (SFA). Next, five tests are conducted in succession to analyze the differences in cost efficiency measured by these two methods, including the distribution, the rankings, the identification of the best and worst banks, the time consistency and the determinants of efficiency frontier. The data are collected from the annual financial statements of Vietnamese banks during 2005–2017. Findings – The results show that the cost efficiency obtained under the SFA models is more consistent than under the DEA models. However, the DEA-based efficiency scores are more similar in ranking order and stability over time. The inconsistency in efficiency characteristics under two different methods reminds policy makers and bank administrators to compare and select the appropriate efficiency frontier measure for each stage and specific economic conditions. Originality/value – This paper shows the need to control for heterogeneity over banking groups and time as well as for random noise and outliers when measuring the cost efficiency.https://www.emerald.com/insight/content/doi/10.1108/JED-12-2019-0075/full/pdf?title=the-cost-efficiency-of-vietnamese-banks-the-difference-between-dea-and-sfacost efficiencydata envelopment analysisstochastic frontier analysisemerging banking |
| spellingShingle | Phong Hoang Nguyen Duyen Thi Bich Pham The cost efficiency of Vietnamese banks – the difference between DEA and SFA Journal of Economics and Development cost efficiency data envelopment analysis stochastic frontier analysis emerging banking |
| title | The cost efficiency of Vietnamese banks – the difference between DEA and SFA |
| title_full | The cost efficiency of Vietnamese banks – the difference between DEA and SFA |
| title_fullStr | The cost efficiency of Vietnamese banks – the difference between DEA and SFA |
| title_full_unstemmed | The cost efficiency of Vietnamese banks – the difference between DEA and SFA |
| title_short | The cost efficiency of Vietnamese banks – the difference between DEA and SFA |
| title_sort | cost efficiency of vietnamese banks the difference between dea and sfa |
| topic | cost efficiency data envelopment analysis stochastic frontier analysis emerging banking |
| url | https://www.emerald.com/insight/content/doi/10.1108/JED-12-2019-0075/full/pdf?title=the-cost-efficiency-of-vietnamese-banks-the-difference-between-dea-and-sfa |
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