Do management practices and competition levels increase commercial bank profits? Evidence from Can Tho, Viet Nam
Journal of Small Business and Enterprise Development
ISSN: 1462-6004
Article publication date: 8 September 2021
Issue publication date: 20 January 2022
Abstract
Purpose
Management practices and competition levels have been shown as important factors affecting the performance of enterprises that do not include banks. The paper, thus, aims to measure management practices and to study the effect of management quality and competition level on the performances of the first-level branch of commercial banks in the context of the Viet Nam banking system.
Design/methodology/approach
The study employed the approach of Bloom and Van Reneen (2007) to quantify management practices of the commercial banks. The level of competition was measured by the number of competitors suggested by Nickell (1996) and the index suggested by Boone (2008). Finally, the effects of management practices and competition level on the bank performances were jointly estimated through a Cobb–Douglas production function, similar to the one used by Bloom et al. (2014).
Findings
The results show that the management practices score is, on average, above the average. While the management practices are found to positively correlate with profits, the competition level is found to significantly reduce bank profits.
Research limitations/implications
Cross-sectional data limit the findings of the paper to a point of time. In the future, studies with panel data are desirable.
Practical implications
The findings of the study help bank managers to make more informed decisions about management practices. Any policy promoting new entrants to the banking market should be carefully considered.
Originality/value
The paper is the first to measure the management practices of commercial banks and to explore the impacts of management quality and competition level on bank performances.
Keywords
Acknowledgements
This research was funded by the National Foundation for Science and Technology Development (NAFOSTED) under grant number 502.01-2016.15. Special thanks go to Nguyen Van Toan and Le Thi Kim Sang for data collection, and to Trinh Cong Duc for excellent research assistance.
Availability of data and material: The datasets generated during and/or analyzed during the current study are available in the Open Science Framework repository, https://osf.io/ybrqu/. DOI 10.17605/OSF.IO/YBRQU
Code availability: SPSS codes.
Citation
Ho, C.H.P. and Nguyen, K.T. (2022), "Do management practices and competition levels increase commercial bank profits? Evidence from Can Tho, Viet Nam", Journal of Small Business and Enterprise Development, Vol. 29 No. 1, pp. 93-105. https://doi.org/10.1108/JSBED-01-2021-0011
Publisher
:Emerald Publishing Limited
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