Much attention has been paid to investigating the economic impacts of M&A in the banking sectors in developed countries such as the US and European countries (DeYoung, Evanoff, & Molyneux, 2009). However, most of the studies on the effects of M&A in banking sectors have been conducted in developed countries such as the USA and European countries in the 1980s-90s (DeYoung et al., 2009). In fact, M&A in Vietnamese banking sectors is not simply driven by market forces, but also by government enforcement.
In the first stage, DEA window analysis is used to evaluate the technical efficiency of Vietnamese banks. Second, the assumption of perfect price adjustment after, or around, an M&A event contradicts the conception of the integration process in the combined entity (Bernad, Fuentelsaz, & Gómez, 2010). Therefore, regardless of the methods used, the performance effects of M&A should be evaluated in the long run.
Rezitis (2008) uses a one-stage stochastic frontier analysis to test the effect of acquisition activity on the efficiency of Greek banks in the 1993-2004 period. Studies in the US suggest that there is evidence of revenue efficiency gains following an M&A. Following Berger and Mester (1997), Drake et al. 2009) assumed that the loan losses were due to "accident", therefore included the loan loss provision in the banks' costs as an input.
By aggregating data over a nine-year period, we also implicitly test the long-term effect of M&A.
Empirical results
It is required that the units under evaluation using DEA should be homogeneous (Dyson et al., 2001); we have included only domestic commercial banks in the sample. From 2009 onwards, the technical efficiencies in both approaches show similar moving patterns. Regarding the change in technical efficiency, the changes confirm what we found in the main hypothesis test, which means that there was a decrease in technical efficiency in 2008 and in 2011-2012.
This suggests that the technology used in the previous year becomes obsolete in the next year; in other words, those banks replace their old technology with new technology. This is reasonable given the rapid speed in technology innovation (ie information technology or mainstream banking) in the banking sector. First, we used the Mann-Whitney U test, and the results reported in Table 8 show that the average efficiency differences between post-M&A banks and non-M&A banks are significant at the 5% level in the value-added approach, and at the 10 % in income approach.
Since the bootstrapping technique proposed by Simar and Wilson (2007) is applied to cross-sectional data, we pool the data over the study period. However, these results are only statistically significant in the value-added approach and not significant in the revenue approach. This is because Vietnamese banks suffered huge losses in the stock markets and gold trading during 2010-2012.
It is interesting that the coefficient for foreign ownership has a significant negative sign in the value addition approach (Models 1-6) and is not significant in the income approach (Models 9- 12). In the short term, therefore, those banks incur relatively more costs related to upgrading technology, training local staff, improving risk management systems, and so on, than other banks, resulting in the negative relationship between foreign ownership and technical efficiency. In terms of ownership, the finding is consistent with what we found using the Mann-Whitney U-test in the previous session, which shows that state-owned banks are more efficient in operation than private banks.
The study examines the effect of mergers and acquisitions on technical efficiency in Vietnamese banks. The technical efficiency in the Vietnamese banking sector during 2008-2016 is quite high, with an average of 0.82. Regarding the effects of mergers and acquisitions on efficiency, the mergers in the Vietnamese context do not cause an increase in efficiency, but rather lead to a decrease in efficiency after the mergers in unlisted merging banks.
On the other hand, it would be a good idea to involve foreign entities in the bank restructuring process as they have superior management skills, which would benefit the local market. This creates the opportunity for a similar study in the future, with more observations, to compare and contrast the effect of mergers and acquisitions with regard to different motives of banks.
Testing the “bad management” hypothesis vs “bad luck” hypotheses
As shown in Table 1 , results (1) and (2) show that loan loss provisions have a significant negative relationship with the first lag of efficiency, indicating that low efficiency leads to higher loan loss provisions. loan to the customer. The results of Model II, on the other hand, do not support the accident hypothesis. The positive coefficients in (3) and (4) suggest that the higher the ratio of loan loss provisions to customer lending, the higher the efficiency, which is contrary to what the bad luck hypothesis predicts.
Bootstrap method proposed by Simar and Wilson (2007)
Vietnamese banks included in the sample, from 2008-2011
Combining DEA window analysis with the Malmquist index approach in a study of the Canadian banking sector. The evidence on efficiency gains: the role of mergers and the benefits to the public. A DEA development study in measuring the impact of maintenance units in the US Air Force.
INTRODUCTION: M&A AND PRIVATIZATION IN DEVELOPING COUNTRIES: —Changing ownership structure and its impact on financial performance —. Performance measurement of the Greek commercial banks using financial ratios: a data envelopment analysis approach. Estimating the degree of operational efficiency gains of a potential bank merger and acquisition: A DEA-based approach.
The Impact of Mean Reversion of Bank Profitability on Post-Merger Performance in the Banking Industry. Market perception of efficiency in bank holding company mergers: the roles of the DEA and SFA models in capturing merger potential.
