Comparison of efficiency and technology across the banking systems of Vietnam, China and India: A stochastic cost and revenue meta-frontier approach

Abstract

Purpose

Given some similarities in the banking industry and economic condition across Vietnam, China and India, the purpose of this paper is to estimate and compare the cost and revenue efficiency of banks across these three countries over the period 1995–2011.

Design/methodology/approach

This study employs the meta-frontier of Battese et al. (2004) and O’Donnell et al. (2008) which envelops the three country-frontiers to measure the cost and revenue efficiency of banks in these three countries.

Findings

This study finds that Chinese banks adopt the most advanced cost-reducing and revenue-increasing technology when providing banking products to their customers, followed by Indian banks. Indian banks are as cost-efficient as Chinese banks, but more cost-efficient than Vietnamese banks. Indian banks are as revenue-efficient as Vietnamese banks, but less revenue-efficient than Chinese banks. Over the analysis period, banks in the three countries have employed the more advanced technology in reducing costs, and they have become more cost-efficient. Nonetheless, for revenue side, the improvement in revenue efficiency and adopted technology are observed only in Chinese banks. The main source of meta-cost and meta-revenue inefficiency of these banking systems stems from undertaking inferior technology rather than managerial ability. Results from comparison across bank types show that state-owned banks (SOBs) are more cost and revenue-efficient than privately owned banks, with Indian and Chinese SOBs being the most cost- and revenue-efficient, respectively.

Practical implications

To improve meta-cost efficiency, Chinese and Indian banks would constitute a relevant benchmark for Vietnamese banks, while to improve meta-revenue efficiency, Chinese banks would be considered as a relevant benchmark for Vietnamese and Indian banks.

Originality/value

This is the first study which utilizes meta-frontier to compare cost and revenue efficiency and technology across banks in Vietnam, China and India.

Citation

Nguyen, T.P.T. (2018), "Comparison of efficiency and technology across the banking systems of Vietnam, China and India: A stochastic cost and revenue meta-frontier approach", Benchmarking: An International Journal, Vol. 25 No. 9, pp. 3809-3830. https://doi.org/10.1108/BIJ-04-2017-0078