Do bank mergers and acquisitions improve technical efficiency of
Vietnamese commercial banks?
Tu D. Q Le1
Institute for Development & Research in Banking Technology
University of Economics & Law, VNU-HCM
Working Paper IBT 2019-02
Abstract
This study investigates the efficiency effect of bank mergers in Vietnam between 2007 and
2011. The findings suggest that the exclusion of off-balance sheet activities from output
specification underestimates the technical efficiency of banks and reduces the number of
possible combinations of mergers. Thereafter, 59 possible bank mergers (PBMs) out of 136
are found to generate technical efficiency gains, thus supporting the view that merging two
efficient banks does not necessarily create an efficient entity. In addition, our findings also
show that in one year before the global financial crisis (GFC), the majority of PMBs are
unable to generate technical efficiency gains. However, in one year after GFC, the majority
of PBMs result in technical efficiency improvements. Last, the strategic choices of 45 PBMs
are identified. Consequently, this would help the industry to determine which Vietnamese
banks to target in future acquisitions.
Keywords Bootstrap-DEA; Vietnam- mergers and acquisitions; Bank efficiency; GFC