Private versus State-owned Banks: A Comparison of Technical Efficiency in the Vietnamese Banking Sector

This paper uses bootstrapped Data Envelopment Analysis (DEA) models to compare the technical efficiency of private and state-owned banks in Vietnam after the country’s accessing to the WTO in 2007 (2007-2012). It is found that state-owned banks are more efficient in terms of aggregate technical efficiency than private banks using both the intermediation and operating approaches. Using the Li (1996) test we find that the primary cause of this is greater capability of state-owned banks to access productive frontier than private banks. This can be due to the fact that deficiencies in the institutional environment have undermined the sustainable and consistent development of private banks.