Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
The Impact of Foreign Bank Presence on Domestic
Vietnamese Banks
Lien Dinh, Jen-Je Su and Tom (Duc-Tho) Nguyen
This paper analyses the impact of foreign bank presence on domestic bank
accounting performance and takes into account the role of bank ownership.
The data covers the period from 1992 to 2011, this period reveals almost
all significant restructuring programs and achievements. The result
indicates that the entry of foreign banks has generated strong competitive
pressure so that domestic banks have to forego their excess profit and
share the non-interest income with foreign banks. As the leaders of the
market, state owned commercial banks experienced the adverse impact on
profit at a greater extent than privately owned banks.
Keywords: foreign bank presence, impact, competitive pressure, bank performance
1 Introduction
There has been a significant rise of foreign direct investment in Vietnam especially
after Vietnam became the 150th World Trade Organization member in 2007, which
has benefited the banking system significantly. The ratio of FDI to GDP started from
4.8% in 1992 and soared to the peak in 2008 at 9.6%, just one year after Vietnam
joined the WTO (World Bank, 2012). Thanks to this foreign investment inflow, a
remarkable amount of foreign investment flew into the banking system, accompanied
with the restructuring of the banking industry. In particular, the establishment of a two
tier system and the allowance of foreign bank entry in early 1990s attracted much
financial foreign investment through the operation of branches, joint venture and
representative offices. The market was open further in 2008, allowing the entry of
100% foreign owned banks. Currently, there are four 100% foreign owned banks,
four joint venture banks and 30 branches, which have increased the competitive
pressure on domestic banks (Table 1, Appendix) (FitchRating (2012). The
considerable increase in competitive pressure raises questions about its impact on
domestic bank performance.
The Vietnamse banking industry is outdated and inactive, so it needs strong
motivation for improvement from foreign bank presence. Vietnam previously followed
the planned economic structure that prioritized state owned enterprises as economic
leaders. These enterprises have been benefited from the lax credit regulations. For
example, they can borrow money without collaterals and meet the eased
requirements of payment capacity. These economic leaders have been inefficient
and dependent on the government’s support, so they have generated the huge loss
for banking system. Foreign banks were allowed to enter the market from 1992 and
soon they have outperformed domestic banks, thus, domestic banks gradually lost
their monopolistic power. Therefore, it is a concern that whether foreign bank
presence becomes a strong incentive for the banking industry’s improvement.
Although earlier studies have investigated the comparative performance among
foreign and domestic banks in Vietnam, they did not evaluate the impact of foreign
bank presence on domestic banks regarding the accounting performance. This
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Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
situation may be because of the limited market share of foreign bank and the
inavailability of data at that time. Moreover, when examining the comparative
performance, these authors applied X-efficiency model, the current study applies
fixed effects and random effects models to evaluate magnitude of the impact.
Therefore, the contribution of the current study is to fill this gap related to Vietnam
and to provide a different method approach to measure the impact of foreign bank
presence on local banks. In addition, to examine the different influences of foreign
bank presence on domestic banks regarding the type of ownership, domestic banks
will be divided into three groups, state owned commercial banks, 100% privately
owned commercial banks and private banks with minor foreign shares.
Moreover, the study also brings up to date information with the dataset ranging from
1992 to 2011. Due to the numerous changes occuring in the late 2000s, this dataset
will reveal the full picture of foreign bank presence and their influence on domestic
banks.
The current study will check whether the impact of foreign bank presence will follow
a framework of spill over effects or competitive effects as Manlagnit (2011) found for
local banks in the Philippines. The spillover effects means that under foreign bank
presence, domestic banks will experience an increase in profit and a reduction in
costs. The competitive effect means that both domestic bank profit and costs will
decline. However, according to Lensink and Hermes (2004), in low financial
developed market and low economic development countries, spillover effects occur
in a different approach. There exists a large gap of banking technique and practices
between foreign and domestic banks, so to keep up with the competitors, domestic
banks have to increase their technological investment and incur higher costs for
implementing new services. Moreover, they trained their staff for new techniques and
practices, which incurred costs. Therefore, this situation may occur for Vietnamese
banks because the market has just been opened, domestic banks may experience
an increase in costs as a consequence of the high investment in technology, risk
management and human resources to keep up with the competitors.
From a policy perspective, the government expects its deregulation on foreign bank
entry to be successful in upgrading the banking industry. The results from the current
study will answer this concern.
The rest of the paper is structured as follows. The second section will briefly present
the background of banking reform and the liberalization of foreign bank entry.
Following section 2, section 3 will briefly review the related literature regarding the
empirical results. Section 4 discusses the research design including data collection,
description of variables and regression models. Section 5 provides the empirical
results which measure the impact of foreign banks’ asset share and numbers on
domestic bank performance using the fixed effects model. Section 6 will summarize
the significant findings.
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Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
2 A Brief Review on the Vietnamese Banking System
Banking liberalization in Vietnam was started by the transformation of the banking
system and the entry of private commercial banks and foreign banks in 1988 (GOV,
1988). One tier banking system was transformed to two tier banking system by the
seperation of four main departments of the State Bank, making the State Bank a
truly central bank (GOV, 1988). These four main departments became four state
owned commercial banks focusing on agriculture, industry, commerce and foreign
trade, which play a role as leaders in the banking industry. With the eased entry
regulations, numerious private banks were established. At the same time, foreign
bank joint ventures and branches joined the markets. As the result, competitive
degree of the market was increased significantly with various participants, helping
the industry to follow disciplines of oriented market.
Accompanied with the liberialization process, Vietnam achieved two milestones for
the effort to integrate into international market. The success of United State-Vietnam
Bilateral Agreement in 2001 (VCCI, 2009) and being a member of the World Trade
Organization (Do, 2013) lift Vietnam to a new outlook. To fit with the new role in the
world market, one of the important duty is upgrading the banking system. Therefore,
many crucial actions have been carried out. Firstly, the government has increased
the requirement for minimum capital twice according to Decree 82/1998/ND-CP to
1000 billion VND (GOV, 1998) and Decree 141/2006/ND-CP to 3000 billion VND
(GOV, 2006c). Secondly, Decree 493/2005/NHNN on the classification of loan
quality into five groups has helped banks easily to set the provision for loans,
preventing from the high bad debts (SBV, 2005). Thirdly, the injection of 14,000
billion VND into four state owned commercial banks to clean the balance sheets,
preparing for privatization has been done (Ngoc, 2006). Lastly, a political bank was
established to be responsible for all political loans, releasing SOCBs from these
uncommercial loans (Ngoc, 2006).
With determined effort to upgrade the banking system, some main achievements
have been seen during the period from 1992 to 2011. Firstly, banks capital has been
enforced significantly, from 1997-2006 the increase of charter capital was 4.96 times
(Lan, 2007). The privatization has been carried out in which all four state owned
commercial banks were privatized and two of them have minor foreign shares
investors (Vietcombank and Vietinbank) in late 2000s (Tien, 2011). Secondly, the
popularity of banking services rose considerably as evidenced by the increased ratio
of using banking account and the reduced percentage of cash ratio in circulation.
The cash ratio has reduced from 20.3% in 2004 to 14.5% in 2009 in compliance with
the significant increase in individual accounts from 135,000 in 2000 to 14 million in
2009 (Nguyen, 2010). Thirdly, the risk-based capital adequacy ratio of banks were
forced to increase from 8% to 9% (Circular 13/TT-NHNN), even 1% higher than
Basel I’s requirement, enhancing the safty of banking services (Nguyen, 2010).
Lastly, the reduction of small and weak banks has been strongly practised through
merging and acquisition. This reaction is aim to fulfil the target of squeezing the
number of banks to a half (around 30-40 banks) and the control bad debts to 3% in
2020 (GOV, 2006a).
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Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
Nevertheless, because the government lacked experience and was inefficient in
management on liberalization, some drawbacks have been seen. Firstly, the
reapplication of interest rate ceiling (Decree 32/2008/ QD-NHNN) in 2008 reflected
the failure of the authority on inflation control (SBV, 2008) . Since the inflation rate
increased rapidly as the result of excess capital inflow, the government failed to
control it by the market practise, so it applied this policy. Associated with the
increased minimum capital requirements, all banks especially small and weak banks
were forced to compete severely for capital mobilization, causing the unpredicted
highly interest rates. In the return, with costly loans, customers failed to repay their
loans, causing high ratio of bad debts for banks. The second drawback is that the
suspension of licence for private banks by the official Letter No. 7171-NHNN-CNH
since the government could not supervise the establishment of these types of banks
(GOV, 2008). Numerious small and weak banks were set up, many of them
belonged to non financial companies, which enhanced the sytem risk. Last but not
least, restriction on loans for securities has been applied for banks because of the
highly risk stock market (Nguyen, 2010). This rule proved that the state started to
reinvolve deeply in bank management after the effort for liberalization. This result
came from the failure of supervision of the government. These drawbacks together
with the Global Financial Crisis (2007) caused the deep economic recession in
Vietnam. Consequently, the credit rating has been downgraded by the Fitch Rating
due to the high ratio of bad debts and outstanding loan growth, which rose from
1,068 thousand billion VND to more than double (2,655 thousand billion VND) in
2011 (Do,2013).
As the requirement of US-VN bilateral agreement and WTO’s member regulation,
the Vietnamese government has liberalized the entry of foreign banks in stages.
According to these regulations, Vietnamese banks have ten years of preparation
before all foreign banks achieved the equal treatment in 2011. Therefore, some
restrictions were still applied during the period to protect the infant industry. From
1991, only foreign bank branches and joint ventures could enter the market (GOV,
1991). They had to restrict their capital mobilization to maximum 20 times of their
charter capital (GOV, 1991). In addition, they were not allowed to recieve the saving
deposits in local currency (VND) (GOV, 1991). In the joint venture bank, foreign
banks could hold maximum 50% of capital and one state owned bank was assigned
to be the local partner (GOV, 1999). From 2006, foreign banks could buy minor
shares in a domestic bank, in which the total foreign shares in a domestic bank was
restricted to 30%. If the foreign investor became strategic investors with holding
share from 15%-20%, they have to commit to support the partner in investment in
modern technology and bank management (GOV, 2007). These investors must hold
their shares at least five years before they could resell their shares. Moreover,
Vietnam achieved one security policy in WTO negotiation, that is it can restrict new
foreign bank applicants by the requirement of parent banks’ total assets. These total
assets were required for a new branch at 20 million USD and for other types of
banks at 10 million USD (GOV, 2006b).
Although those restrictions applied to protect the industry, Vietnam has to open the
market through three milestone agreements. The first one is in 2006, foreign
investors were allowed to transfer their income abroad as the lax regulation of
foreign currency was applied (GOV, 2006d). The second one is that 100% foreign
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Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
owned banks were allowed in 2008, in which foreign banks were treated as domestic
banks (VCCI, 2010). The most striking liberalization is in 2011, all foreign banks
achieved the national treatment, that means there was no different treatment among
banks (VCCI, 2010).
With the current adjustment of the Baking Law in 2010, the governement reflected
their determination to upgrage the banking system by three new rules (GOV, 2010).
The first one is that there is a specific time length for proceeding the documents for
new applicants. Secondly, banks could negotiate lending rates with customers
depending on their own business strategies, although the floor interest rate was still
applied. The last is that there must be at least one independent investor on the
Board of Management, which increases the transparent degree for banks.
In general, Vietnam has gradually adjusted its market disciplines to fit with
international standard since the US-VN bilateral agreement and being WTO member
were successful. Being a developing country, with the worry that domestic banks
were not capable for strong competition, the government applied some restrictions
for protecting the infant industry. However, associated with inefficient management,
during the period, some drawbacks occured, still the restructuring process has to
keep going.
3 Literature Review
The literature which analyse the effects of foreign bank presence on domestic bank
performance generally focus on two approaches: spillover effects and competitive
effects. Some studies found only one approach occuring while many others
discovered that in developing countries both spillover effects and competitive effects.
The pioneer in the literature is a study of Claessens et al (2001) which covered the
dataset from 1988 to 1995 of 80 countries. They found that the competitive effects
had forced domestic banks to reduce their profit, margin and non interest income.
Moreover, foreign bank number exerted immediately competitive pressure as foreign
banks entering the market, although their market shares were still limited. However,
a trade-off for a higher competitive capacity for domestic banks was the reduction of
their capital as the result of declining profit. These authors applied the first different
for all variables and run the regression based on the fixed effects model.
Before this study, one study about the effects of foreign bank presence on
Indonesian banks was carried out by Cho (1990). This author concluded the same
finding with Claessens et al (2001). The competitive degree of Indonesian banking
industry has been increased significantly as the consequence of the entry of foreign
banks.
Another study focusing on the Philippines banking industry also found the
competitive effects generated by foreign bank presence with respect to the reduction
of interest rate spread and profit of domestic banks (Unite and Sullivan, 2003). Under
competitive pressure, domestic banks no longer took advantage of “relationshipbased lending” as they used to so they became more efficient. Moreover, foreign
investors in the acquired banks usually applied a stricter screening method that only
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Proceedings of Global Business and Finance Research Conference
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transparent firms could meet the requirement, reducing banks’ non interest income
(Unite & Sullivan, 2003).
Sturm and Williams (2004) investigated the effects of foreign banks in Australia from
1988 to 2001 and recognised that the competitive capacity of domestic banks had
been improved after the entry of foreign banks. However, Australia was a developed
country so domestic banks were already competitive and almost all of them
performed better than foreign banks. Therefore, the threaten of market sharing was
raised due to the diversification of bank types. In addition, the competitive pressure
became stronger as the result of economic recession in the early 1990s and after the
deregulation on foreign bank entry.
Recently, some studies carried the research for single country again confirmed that
competitive effects were created after the entry of foreign banks. Firstly, Xu (2011)
measured the impact of foreign bank presence on Chinese banks from 1999 to 2006.
This author composed a disaggregated measure for foreign bank presence instead
of depending on the number or asset share of foreign banks. This method took into
account the effects of each city’s policy regarding foreign banks since China includes
many big cities. With the new way of calculation on foreign bank presence, Xu still
concluded that the competitive effects forced domestic banks to become more
efficient. At the same time, Manlagnit (2011) investigated the effects of foreign banks
on the Philippine banking market from 1990 to 2006. This author applied the fixed
effects model and found that domestic banks had to quit their excess profit and
reduce their costs under competitive pressure. She argued that the government
liberalization policy has been successful.
Although numerous studies argued that the competitive effects were generated, few
studies found the spillover effects were created as the result of the presence of
foreign banks. Among others, Jeon, Olivero and Wu (2011) carried the study in Asia
and Latin America from 1997 to 2008. They concluded that foreign bank entry
created spillover effects that domestic banks experienced the increase in profit and
the reduction in costs. These authors said that to make the spillover effects to occur,
foreign banks must be more efficient and less risky than domestic banks so that
domestic banks could learn modern techniques and advanced practices from foreign
banks. Moreover, they found that this effects depended on the type of foreign banks,
in which 100% foreign owned banks put the strongest impact on domestic banks
compared to others. Similarly, de Haas and van Lelyveld (2006) found that in Central
and Eastern Europe from 1993 to 2000, the spillover effects occured as the result of
the entry of foreign banks. They said that domestic banks benefited from foreign
banks’ rich capital and good management skills.
In case of developing countries, some studies found the combined effects from both
spillover effects and competitive effects. For example, Lensink and Hermes (2004)
reevaluated the dataset of Claessens et al (2001) with focus on the impact of level of
economic development. They concluded that in the low developed economy,
domestic banks saw an increase in costs and margin as a consequence of the
presence of foreign banks. They considered the increased costs as the spillover
effects that forced domestic banks to incur costs in improving technology and
implementing new services. This effects occured because there was a big gap of
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Proceedings of Global Business and Finance Research Conference
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banking technique and practices between foreign and domestic banks. Also the
increased costs was the result of upgrading monitoring activities (Detragiache,
Tressel, & Gupta, 2008). However, net interest margin increased because of the
domestic banks’ monopolistic power in pricing the banking services in the
segmented market (Lensink & Hermes, 2004). Another cause is that to keep up with
the strong competitors, domestic banks had to upgrade their management and
human capital. Implementing the new services that these banks learnt from
competitors also incurred costs. These two authors did another the study in the
same year in 48 countries from 1990-1996 (Hermes & Lensink, 2004). In this study,
they focused on the level of financial development. They found the same results
when domestic banks’ costs and margin increased after the foreign bank entry in the
low level of financial developed markets. With the same explanation, increased costs
and margin were considered as the spillover effects which was the precondition for
the competitive effects when the market became more developed. Accompanied with
those findings, they also found the opposite results in the high level of financial
developed countries where the costs and margin reduced. In a competitive and
highly developed market, foreign bank presence will lead to a reduction of costs
because domestic banks were already competitive and the market was no
segmented (Hermes & Lensink, 2004).
In these studies, there is scare evidence on the impact of foreign bank presence in
terms of types of domestic banks. Only one study, Unite and Sullivian (2003)
mentioned this issue and they found that uunder foreign bank presence in the
Philippines from 1990-1998, the smaller extended commercial banks (ECBs)
reduced their interest rates to the largest extent and increased their size more
quickly than larger extended commercial banks. While the group-affiliated banks
experienced a reduction in their revenue and profit, they could not improve their
competitive capacity as small ECBs because of their duty to support group
cooperation rather than to perform efficiently (Unite & Sullivan, 2003). Moreover,
group-affiliated banks maintained strong political connections which may have had
an adverse impact as the policy regime changed, thus the impact from the political
relationship was much stronger than from foreign bank presence (Unite & Sullivan,
2003).
However, the impact of foreign banks is found to not only follow the linear
relationship but also follow the inverted U curve shape based on the degree of
foreign bank presence (Hermes & Lensink, 2001). Particularly, in the early stage of
entry, accounting for a small share, foreign banks do not provide sufficient
competitive pressure on domestic banks, thus, local banks still dominate the market.
When the extent of foreign bank presence can achieve a sufficient level of market
share to generate strong competitive pressure, domestic banks are forced to reduce
the interest margin to protect their market shares (Hermes & Lensink, 2001). For
instance, after China became a WTO member in 2001, foreign bank presence
increased significantly, threatening domestic banks’ market share so the interest rate
was adjusted to a reasonable rate (Xu, 2011)
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Proceedings of Global Business and Finance Research Conference
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4 Methodology
To examine the impact of foreign bank presence, this study employs the fixed effects
model to take into account the panel data. Basically, each regression model will
include three sets of variables: (1) the performance of domestic banks (2) the
presence of foreign banks (3) other variables that directly affect the performance of
domestic banks.
<Table 2(inserted here)>
The performance of domestic banks
According to Claessens et al. (2001), the performance of a bank can be measured
using the information in the bank’s income statement (each measured as a ratio of
total assets): Profit, Margin, Costs and Non interest income.
Before-tax profit (Profit) is used to measure bank profitability, which excludes the
impact of the tax regime which may be different among banks. The overhead cost
(cost) includes administrative costs and fee and service expenses. The net interest
margin (margin) measures bank efficiency through the interest spread with the belief
that if the interest spread is reduced, banks become more efficient. The non interest
income (nonincome) are mainly from fee based activities. If banks are equipped with
modern technology and possess expert management, they will focus more on non
interest activities. Therefore, nonincome can be used as an indicator for the level of
technological and managerial development of banks. These measures (indicators)
will be used in this study to measure bank performance from different (but related)
aspects.
Foreign bank presence
According to the literature, the presence of foreign banks are typically measured as
(1) the ratio of foreign bank number to the total number of banks (2) the asset share
of foreign banks to total banks’ assets (Cho, 1990; Claessens et al., 2001; Jeon et
al., 2011; Lensink & Hermes, 2004; Manlagñit, 2011; Peria, Soledad, & Mody, 2004;
Unite & Sullivan, 2003). Domestic banks will face competitive pressure right after
foreign banks enter the market. Therefore, in the first stage, the impact of the
number of foreign banks forces domestic banks to restructure their business to
protect their market share. For the time being, foreign banks may increase their
investment and gain additional asset shares and this will create further impacts on
domestic banks. In this study, following the literature, both measures of foreign bank
presence will be considered.
Control variables
Two sets of variables that directly affect the performance of domestic banks will be
used: bank-specific indicators and macroeconomic variables.
Bank specific indicators
Following Manlagñit (2011), this study will use the following bank specific variables:
the ratio of equity, loans, customer and short-term funding, loan loss provision to
total assets as well as individual bank’s asset shares. These five variables are used
since they reflect a range of bank-specific characteristics that might directly affect a
bank’s performance. The level of bank capital (equity) is a proxy for bank strength
because well capitalised banks generate greater trust from customers so they may
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Proceedings of Global Business and Finance Research Conference
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raise cheap funds mainly from deposits, as well as these banks are cautious on risk
management so they have loans with good quality. The loan to total assets ratio
reflects the banks’ ability to earn interest income and their willingness to diversify
services. If banks possess a high ratio of loans, that means they concentrate purely
on interest activities and are less ready to diversify their non interest activities. The
customer and short-term funding is the cheapest fundings on condition that banks
manage their physical network well. With the cheapest funds, banking services
remain highly competitive and increase the revenue of banks. Overhead costs
indicate the bank’s capacity to cost management and the technological investment. If
they properly invest in banking technology, the overhead costs may increase in the
first stage but later this investment will improve the bank profitability considerably.
Loan loss provision reflects loan quality; if the banks are aggressive to increase their
market share instead of raising their income, this ratio may remain high. The market
asset share indicator is used to control the size (scale) effect, the large banks may
take advantage of the economies of scale, in which an increase in the total assets
will lead to the rise in profit due to the reduction of cost margin unit.
Macroeconomic indicators
Two macroeconomic variables will be used: GDP per capita and inflation rate. These
two variables reflect the macroeconomic environment that would directly affect
bank’s profit and other performance. GDP per capita was a proxy for the level of
economic development, which had been applied in the study of Lensink and Hermes
(2004).
Hypothesis
H1: In the literature, many authors found that foreign bank presence create the
competitive effects, which force domestic banks to reduce both profit and costs
(Manlagnit, 2011; Xu, 2011, Sturn and Williams, 2004, Claessens et al, 2001;
Claessens and Laeven, 2003; Unite and Sulllivan, 2003). Foreign banks often own
competitive advantages to decide to invest in a foreign market. Moreover, in
developing countries, foreign banks outperform domestic banks since they benefit
from their modern banking techniques and practices. Therefore, foreign banks
become strong competitors which threaten the domestic banks’ market share if the
latter do not upgrade their efficiency. In Vietnam, based on the wish of gaining
competitive capacity for domestic banks, foreign banks enter Vietnam must belong to
well known banks of the world. In particular, as mentioned above, parent banks must
meet the requirement of minimum total assets for new application. This requirement
allows only strong competitors entering the market. As a result, domestic banks face
the competitive pressure for change. Their profit, margin and non interest income will
be expected to reduce.
H2: Some other studies found that foreign bank presence create the spillover effects
that domestic banks experience the increase in profit and a reduction in costs ( De
Haas and Van Lelyveld, 2006; Jeon, Olivero and Wu, 2011). In these studies,
domestic banks are already competitive and under foreign bank presence, they copy
the modern banking techniques to improve their profit. However, in low economic
development (Lensink and Hermes, 2004) or in low financial development market
(2004) both competitive effects and spillover effects simultaneously exist. The results
of these studies show that domestic banks experience a reduction in profit and an
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Proceedings of Global Business and Finance Research Conference
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increase in costs. The reduction in profit comes from the competitive effects while
the increase in costs comes from spillover effects. They explained that there is a
large gap of banking techniques and practices between foreign banks and domestic
banks, so domestic banks have to increase technological investment. As a result, at
some extent, domestic banks upgrade their operation and will experience the
reduction of costs in the later stage when the investment practise. We believe that
this situation occurs for the case of Vietnam because of two main reasons. Firstly,
the banking industry is old style banking practices in which state owned commercial
banks dominated the market. Secondly, only strong foreign banks can enter into the
market. The only way to survive for domestic banks is becoming more efficient
through increasing technological investment.
Regression Models
The study will follow two steps:
-Applying general effects of foreign bank presence at a bank level and a
macroeconomic level.
Yit    FSt  Bit  Nt  it (1)
-Using a dummy variable to differentiate the influence of foreign banks toward
different types of domestic banks
Yit  0  1FSt Di (1)  2 Di ( 2) FSt  Bit  Nt  it (2)
Yit : Indicator of bank performance for domestic bank i at time t
FSt: The number /asset share of foreign banks in year t
Bit: Domestic bank specific indicators
Nt: Macroeconomic indicators
D(1), D(2) : state-owned commercial banks (i(1)), wholly private owned banks (i(2)).
The data set is ranging from years 1992 to 2011 which covers all three types of
banks: state owned commercial banks, privately commercial banks and foreign
banks (include 100% foreign owned banks, joint venture banks). This data set is
collected from the Fitch Rating source in 2012, legally used by the Department of
Acounting, Finance and Economics, Griffith University.
5 Empirical Results
Table 3 provides the descriptive information for both domestic banks and foreign
banks. The general comparison between domestic and foreign banks is necessary to
attain the overall picture for further understanding the later analysis. Foreign banks
outperform domestic banks as they earn higher profit as well as lower loan loss
provision. The main contributors to a higher profit are equity, non-interest income
and investment cost. The ratio of equity to total asset of foreign banks is higher than
that of domestic banks owing to the fact that the total assets of the former is much
lower than the later. Foreign banks concentrate on the whole sale market and
provision of banking services, so their main income arises from non-interest activities
which is opposite to domestic banks, focusing on loans. The high ratio of cost may
be explained as the increase in technological investment and establishment cost
while domestic banks enjoy the after-establishment period. In addition, foreign banks
attract skilled staff from local banks by the high salary and bonus strategies, which
contributes to increasing the human cost. Foreign banks not only possess good risk
management skills but also they focus on low risk activities compared to domestic
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Proceedings of Global Business and Finance Research Conference
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banks, so they enjoy the low rate of loan loss provision. Although domestic banks
benefit from government’s support and their longevity, their inefficient management
skills cause the low rate of profit and high rate of risk.
<Table 3(inserted here)>
Following are the regression results using fixed effects model to evaluate the impact
of foreign bank assets share and numbers on four accounting performances of
domestic banks: profit before tax, overhead costs, net interest margin and noninterest income. The reason to choose fixed effects model arises from the results
from the Hausman test. This result rejects the null hypothesis which means the fixed
effects model is consistent while the random effects model does not provide the
consistent estimates. In particular, the calculate chi-square equal 29.545 which is
larger than the critical chi-square  02.95,11  19.675 and the p-value=0.0019. In all
estimations, the p-value are calculated using heteroskedasticity-robust standard
errors.
<Table 4(inserted here)>
The results from Table 4 demonstrate that foreign presence does impact on
domestic bank performance. Each performance variable was regressed twice with
the impact of foreign bank number and foreign bank asset share. There are four
main performance indicators: profit, costs, net interest margin and non interest
income considered here. The coefficient of Fbnumber is negative and significant in
the estimation of profit, margin and noninterest income while has the positive and
significant relationship with overhead costs. Similarly, the coefficient of Fbassetshare
indicate the same relationship with four performance indicators as Fbnumber, except
this relationship is statistically significant in the estimation of profit and costs, while
no significant in the estimations of margin and noninterest income. The results
seems to fit our hypothesis that in developing countries. Foreign bank presence will
create the competitive effects in which domestic banks have to reduce their profit. At
the same time, the presence of foreign banks generate spillover effects through the
increased costs of domestic banks as a result of the increased technological
investment. In addition, the result is in line with Claessens et al (2001) when the
Fbnumber provides the stronger competitive impact than the FB market share. They
concluded that domestic banks soon prepared for competition as foreign banks
entered into the market, when foreign banks’ asset share were still limited. In
Vietnam, from 1992-2009 there were only joint venture banks and branches allowed,
then from 2009 all types of foreign banks could operate in the market. The
liberalization for foreign bank entry was enhanced when all foreign banks achieved
the equal treatment from 2011. Therefore, before 2011, foreign bank asset share
maintained limited, yet their popularity does create competitive pressure.
From Table 4, not only competitive effects but also spillover effects are generated
here. The result for the profit variable suggests that both Fbnumber and
Fbassetshare generate the competitive effects that forced domestic banks to forego
their monopolistic power. In addition, the coefficient of Fbnumber in the estimation of
margin indicates that domestic banks become more efficient as they can reduce the
interest spread. Foreign banks are advantaged in providing fee services and soon
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they share the market with domestic banks, thus the non interest income of domestic
banks was decline. However, the result for the cost variable shows that in
developing countries, due to the large gap of bank techniques and practices between
foreign banks and domestic banks, domestic banks have to increase investment in
technology and other resources significantly. This result is consistent with Herms
and Lensink (2004) since they concluded that the spillover effects were created in
low level of financial development markets through the increase in technological
investment.
<Table 5, 6, 7 (inserted here)>
Tables 5, 6 and 7 show the results of estimating equation (2), in which the type of
ownership was considered. Table 5 indicates the result of foreign bank impact on
state owned commercial banks (SOCBs) while table 6 and 7 demonstrate the
results of foreign bank presence on 100% private banks(100% POCBs) and private
banks with minor foreign shares (POCBs) respectively. The results show that
SOCBs reduced their profit at the largest extent compared with 100% POCBSs
while the POCBs experienced an increase in profit. This supports the hypothesis that
both competitive and spill over effects simutaneously exist. Both SOCBs and 100%
POCBs experienced the competitive effects in which the formers face the stronger
impact. However, POCBs achieved the spillover effects as the result of the
cooperation with foreign investors. POCBs become more efficient than the rest.
Although all domestic banks increased their overhead costs, each type experienced
its own extent of increased costs. While SOCBs and POCBs increased their costs
under the foreign bank presence, the relationships are not significant, 100% POCBs
saw a significant and strong increase in costs. This result demonstrate the big gap of
banking techniques between 100% POCBs and others.
In case of margin, only SOCBs saw a significant and negative relationship between
margin and Fbnumber. This explains the different types of customers among banks.
SOCBs dominated the market and have almost all large and high profile customers,
while others focused on small and medium customers. Foreign banks may attract
customers mainly from SOCBs. This also raises the concern about SOCBs’ ability to
keep their loyal customers. According to World Bank (2012) the average interest
spread of all banks dropped remarkably from 10.14% in 1992 to 6.8% in 2000 and
2.9% in 2011, proving the presence of foreign banks exerted competitive pressure
on domestic banks that they have to become efficient for survival.
Interestingly, only POCBs experienced the significant reduction of non interest
income, although others saw the similar relationship between non interest income
with foreign banks presence, but not significant. This result shows that the spillover
effects were generated when foreign investors applied the stricter screening
techniques on transparent customers. This also raises the concern on the inside
sharing of customers when foreign investors not only invested in domestic banks but
also operated their owned foreign banks in the market. This is considered as a trade
off between increased profit and reduced non interest income.
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6 Discussions of Results and Conclusion
This paper investigated the effects of foreign banks presence on four indicators of
accounting performance of domestic banks from 1992 to 2011 and take into account
the type of ownership. The empirical results are supportive to our hypotheses that
both competitive effects and spillover effects simultaneously exist. However, they
provide strong evidence on the dominance of competitive pressure which causes the
reduction in profitability, margin and non interest income. The spillover effects were
seen in the increased cost as the result of the large gap of bank techniques and
practices between foreign banks and domestic banks. This explanation is different
for developed countries where the spillover effects generate the reduction of cost
because in these markets, domestic banks are already highly equiped with modern
banking techniques and practices.
We interpret the results as follows. The results in this paper are consistent for
Vietnam from 1992 to 2011. As was shown in the background section, SOCBs
dominated the market but they operated inefficiently. Therefore, their market share
reduced significantly at the benefit of foreign banks. Compared to POCBs, SOCBs
have much more high profile customers than POCBs because they exist in the
market for longer time and they have much larger sizes than POCBs. Therefore,
foreign banks applied “cherry picking” strategy to attract high profile customers
mainly from SOCBs. In addition, more customers tend to trade with foreign banks as
they provide better international payment services. For instance, in 2007 there was
only 3% Vietnamese companies trading with HSBC; this ratio rose to 50% in 2010
(Nguyen, 2010). In terms of overhead costs, all banks from 2001-2006 experienced
a reduction of cost efficiency as they increase investment in technology (Vu and
Turnell (2010), Nahm and Vu (2008)). Accompanied by technological investment,
domestic banks increased their charter capital significantly as the result of the
minimum capital requirement. For instance, in 2008, Eximbank increased its charter
capital more than double from 2,800 billion VND to 7,380 billion VND (Trinh,
Nodate). Another competitive strategy used is that domestic banks expand their
physical networks to support capital mobilisation, resulting higher costs. Currently,
the average branches of SOCBs accounted for 97 branches and that of private
banks was 18 in 2008 (Trinh, Nodate). Apparently, because SOCBs are well
capitalised banks rather than POCBs so they have already equiped the relative
modern techniques and easily upgraded to standard ones while the less capitalised
POCBs could not properly afford these costs. As a result, an increase of cost was
seen under competitive pressure for POCBs larger than that of SOCBs.
In terms of net interest margin, only SOCBs experienced the reduction of interest
spread because they have to forego their monopolistic power which used to provide
them the power of pricing their services. That explains the SOCBs become the direct
competitors of foreign banks regarding the high profile customers. In terms of non
interest income, POCBs with minor foreign shares saw a reduction in non interest
income because they applied stricter monitoring techniques with the support of
foreign investors. This is also considered as the spillover effects that this type of
bank achieves more quickly compare to others.
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In terms of bank specific indicators, they show the expected signs according to the
unique characteristics of each type of bank. SOCBs focused on the credit market so
their main income comes from interest income. Consequently, an increase in loans
leads to an increase in profit for SOCBs. Moreover, they benefit from the economies
of scale as a higher asset share generates a higher profit. While SOCBs are
supported financially by the government, 100% POCBs operate only on their own
budget, so they take advantage of the capital well. Therefore, an increase in equity
will cause a significant increase in profit. The results for POCBs confirm that with the
support of foreign investors, they upgrade their monitoring technique that helps to
reduce their loan loss provision. As being privately onwed banks, POCBs also use
their equity efficiently to create return, so equity shows the positive and significant
relationship with profit. In general, the results of estimation regarding the type of
ownership provide the clear and realiable situation of each type of bank and their
different behaviours under the impact of foreign bank presence.
Macro economic indicators present the expected signs as inflation reduced profit and
increased cost while the income level contributes to profit and reduced costs. The
inflation rate remained high during the period (WorldBank, 2012) which generated
vulnerability for all banks. Moreover, as the government could not control the high
inflation rate, so the interest rate ceiling was reapplied in 2006, causing difficulties for
bank operations. As a result, the inflation rate had a negative influence on profit but a
positve influence on overhead costs. With the improvement of income level, more
people use banking services, therefore, GDPc maintains a positive impact on profit
and a negative impact on costs, yet the magnitude is minimal because the income
level was just 1,534 USD in 2011 (WorldBank, 2012).
From a policy perspective, the liberalisation on foreign bank entry to improve the
competitive capacity for domestic banks has been successful. The competitive
effects were seen in the results of profit, margin and non interest income. Besides,
spillover effects were created since domestic banks increased technological
investment to fulfil the gap of banking techniques and practices. In the long term,
spillover effects become more obvious when the technological improvement
contribute to reduced costs as the result of increased capital margin.
According to Hermes and Lensink (2001), the impact of foreign bank presence
followed the inverted U shape that foreign bank presence must reach a certain level
to exert the competitive effects, before that level, this effects may be cancelled since
the domestic banks still practise their monopolistic power. We also calculate the
model considering both FB presence and square (Fbpresence). The results show
that the impact of foreign bank presence on profit and margin follow the inverted U
shape. So we confirm that competitive effects exist in the market since these two
indicators were reduced.
Finally, we realise that our data set cover the period from 1992 to 2011, so we
cannot analyse the impact of foreign bank presence at the time all foreign banks
were equally treated. Therefore, if the current data is available after 2011, the results
may be much different since the degree of competition has been increased
considerably.
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Appendix
Table 1 Number and total assets of all banks from 1992 to 2010
Bank/Year
SOCB
4
1992
Total assets
(m USD)
2,759
POCB
JV
100% FB
Branches
(HCMC)
4
1
118
23
No
4
2000
Total assets
(m USD)
14,694
14
4
1,269
177
17
1,431 (2001)
No
4
2009
Total assets
(m USD)
68,531
30
4
4
23
41,951
1,173
1.75
9,296
No
4
2010
Total assets
(m USD)
79,581
29
3
4
30
61,221
1,859
1.4
11,087
No
Source: Fitch Rating source, AFE, Griffith University and personal contact for branch data.
Access December 2012.
Table 2: Descriptive statistics of the variables
Variables
Description
Dependent variable
Profitability (profit)
Before tax profit to total assets
Overhead costs (cost)
Overhead expenses to total assets
Net interest margin(margin)
Interest income minus interest expense to total assets
Non- interest income (nonincome)
Independent variable
Non interest income to total assets
Foreign bank presence indicators
Foreign
bank
number
(fbnumber)
Foreign asset share (fbassetsh)
Bank variables
Number of foreign banks to total numbers of banks
Foreign banks’ assets to total assets
Equity/total asset (equity)
Capital equity to total assets
Loan to asset (loan)
Loans to total assets
Customer funding (deposit)
Short term and long term deposits
Loan loss provision (llpro)
Loans loss provisions to total loans
Market share (assetsh)
Total assets of bank to total assets of the industry
Macroeconomic indicators
GDPc
GDP per capita
Inflation (inflation)
Percentage change in the CPI
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Table 3 Descriptive Statistics (inserted here)
Variable
Obs
Mean
Std. Dev.
Min
Max
Domestic banks
pro
391
0.016
0.012
-0.020
0.090
nim
403
0.030
0.018
-0.008
0.200
co
406
0.017
0.014
0.003
0.175
eq
417
0.124
0.116
-0.007
1.000
csf
415
0.802
0.120
0.059
0.955
loa
415
0.564
0.163
0.114
0.892
llp
292
0.028
0.107
0.000
0.802
oi
406
0.010
0.010
-0.008
0.110
toar
417
0.047
0.078
0.000
0.471
Foreign banks
pro
55
0.019
0.018
-0.078
0.049
nim
56
0.031
0.011
0.002
0.063
co
56
0.020
0.011
0.002
0.052
eq
59
0.228
0.133
0.091
0.678
csf
59
0.728
0.132
0.318
0.893
loa
59
0.501
0.172
0.165
0.833
llp
40
0.005
0.003
0.000
0.012
oi
54
0.014
0.010
-0.001
0.037
toar
59
0.005
0.003
0.001
0.015
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Table 4 Regression results: All banks
(1)
profit
(2)
profit
cost
0.0955
(0.368)
0.106
(0.282)
equity
0.0375***
(0.001)
0.0385***
(0.000)
deposit
loan
llpro
nonincome
assetshare
-0.00322
(0.190)
0.0105**
(0.010)
-0.00630
(0.428)
0.391***
(0.000)
-0.00227
(0.902)
-0.00293
(0.225)
0.0102*
(0.011)
-0.00578
(0.449)
0.387***
(0.000)
0.000248
(0.990)
inflation
-0.000263*
(0.011)
-0.000438**
(0.001)
gdpc
0.0000113***
(0.001)
0.0000199***
(0.000)
fbassetshare
-0.140*
(0.032)
fbnumber
_cons
N
R-sq
adj. R-sq
(3)
cost
(4)
cost
279
0.378
0.355
279
0.384
0.361
(7)
nonincome
(8)
nonincome
1.435***
(0.000)
1.471***
(0.000)
0.375*
(0.013)
0.370*
(0.012)
0.0389***
(0.000)
0.0387***
(0.000)
0.00756
(0.449)
0.00931
(0.336)
0.00810
(0.224)
-0.000795
(0.777)
-0.00148
(0.622)
-0.000208
(0.938)
-0.000223
(0.933)
0.000834
(0.728)
0.00130
(0.594)
0.00550
(0.196)
0.00656
(0.108)
0.00306
(0.590)
0.00361
(0.507)
-0.00499
(0.312)
-0.00572
(0.234)
0.0106**
(0.005)
0.00919*
(0.014)
-0.00121
(0.876)
-0.00174
(0.818)
0.00142
(0.758)
0.00242
(0.566)
0.213
(0.107)
0.212
(0.101)
-0.356*
(0.041)
-0.369*
(0.037)
-0.0547**
(0.002)
-0.0557**
(0.003)
0.0357
(0.084)
0.0413*
(0.050)
0.00126
(0.927)
0.00154
(0.908)
0.000421***
(0.000)
0.000584***
(0.000)
-0.000162
(0.285)
-0.000446*
(0.012)
-0.0000138*
(0.010)
-0.00175**
(0.001)
-0.00197
(0.635)
(6)
margin
0.0106
(0.083)
-0.0000226**
(0.005)
0.267**
(0.003)
-0.00146
(0.726)
(5)
margin
0.00000961*
(0.026)
-0.0690
(0.428)
0.00247**
(0.002)
0.0132*
(0.020)
288
0.302
0.280
0.0000225***
(0.000)
0.0130*
(0.024)
288
0.298
0.275
p-values in parentheses
* p<0.05, ** p<0.01, *** p<0.001
.
20
-0.000256*
(0.019)
-0.000356**
(0.002)
0.00000897*
(0.037)
0.0000145**
(0.005)
-0.180
(0.056)
-0.00186**
(0.006)
-0.00162**
(0.006)
-0.00189
(0.742)
-0.00353
(0.526)
0.00228
(0.586)
0.00253
(0.532)
288
0.556
0.540
288
0.562
0.546
288
0.114
0.085
288
0.112
0.083
Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
Table 5 Regression results: State-owned commercial banks (SOCBs)
(1)
profit
(2)
profit
(5)
margin
(6)
margin
(7)
nonincome
(8)
nonincome
cost
0.291
(0.303)
0.213
(0.365)
1.085
(0.118)
1.139
(0.093)
0.223
(0.402)
0.238
(0.353)
equity
0.132
(0.105)
0.0937
(0.324)
-0.0697
(0.087)
-0.0604
(0.137)
0.0133
(0.856)
0.00258
(0.979)
0.0921
(0.122)
0.0770
(0.107)
deposit
-0.0150*
(0.035)
-0.0193
(0.058)
0.000762
(0.871)
0.00233
(0.563)
0.00831
(0.239)
0.00561
(0.341)
0.00248
(0.719)
0.000123
(0.974)
loan
0.0383*
(0.044)
0.0322
(0.140)
-0.00691
(0.457)
-0.00502
(0.635)
0.0128
(0.250)
0.0101
(0.242)
-0.0115
(0.348)
-0.0137
(0.255)
llpro
-0.116
(0.127)
-0.100
(0.187)
0.0501
(0.245)
0.0474
(0.276)
0.0944
(0.110)
0.0956*
(0.048)
-0.00840
(0.795)
-0.00519
(0.826)
nonincome
0.137
(0.495)
0.289
(0.367)
0.278
(0.410)
0.301
(0.428)
-0.323
(0.099)
-0.411*
(0.050)
assetshare
0.139*
(0.022)
0.118
(0.080)
-0.0473
(0.096)
-0.0445
(0.150)
0.0535
(0.109)
0.0528*
(0.029)
-0.00851
(0.778)
-0.0116
(0.709)
0.000173
(0.414)
0.000293
(0.291)
-0.000276
(0.320)
-0.000564
(0.064)
-0.000245
(0.119)
-0.000398
(0.074)
-0.00000338
(0.603)
-0.0000101
(0.333)
0.0000242**
(0.009)
0.0000393**
(0.008)
0.00000885
(0.319)
0.0000176
(0.154)
inflation
-0.000693
(0.058)
-0.000576
(0.052)
gdpc
0.0000431*
(0.017)
0.0000407*
(0.015)
fbassetshare
-0.499*
(0.037)
fbnumber
_cons
N
R-sq
adj. R-sq
(3)
cost
0.176
(0.133)
-0.00246*
(0.034)
-0.0554**
(0.007)
48
0.807
0.755
(4)
cost
-0.0403
(0.057)
48
0.758
0.692
-0.289
(0.095)
0.00174
(0.100)
0.0249*
(0.029)
48
0.639
0.554
-0.258
(0.116)
-0.00337*
(0.026)
-0.00243
(0.051)
0.0211
(0.096)
-0.0241
(0.158)
-0.0194
(0.115)
0.00660
(0.605)
0.0114
(0.424)
48
0.646
0.562
48
0.678
0.592
48
0.693
0.610
48
0.521
0.407
48
0.536
0.427
p-values in parentheses
* p<0.05, ** p<0.01, *** p<0.001
.
21
Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
Table 6 Regression results: 100% privately owned commercial banks (100%POCBs)
(1)
profit
(2)
profit
cost
0.0674
(0.542)
0.0954
(0.313)
equity
0.0393**
(0.010)
0.0389**
(0.006)
deposit
0.00115
(0.880)
loan
0.0117**
(0.004)
llpro
-0.00657
(0.175)
0.000379
(0.958)
0.0120**
(0.004)
-0.00693
(0.138)
(3)
cost
(4)
cost
(5)
margin
(6)
margin
(7)
nonincome
(8)
nonincome
1.348***
(0.000)
1.390***
(0.000)
0.444**
(0.007)
0.448**
(0.003)
0.0434**
(0.002)
0.0417**
(0.002)
0.0105
(0.497)
0.0117
(0.412)
0.0119
(0.296)
0.00580
(0.639)
-0.000360
(0.962)
-0.00239
(0.769)
-0.000444
(0.962)
-0.00186
(0.837)
0.0110
(0.235)
0.0112
(0.221)
0.00294
(0.582)
0.00411
(0.435)
0.00400
(0.625)
0.00469
(0.552)
-0.00705
(0.247)
-0.00716
(0.201)
0.00954*
(0.021)
0.00854*
(0.033)
-0.00445
(0.630)
-0.00519
(0.562)
0.00248
(0.674)
0.00260
(0.623)
nonincome
0.421***
(0.000)
0.415***
(0.000)
0.240
(0.116)
0.248
(0.092)
-0.208
(0.302)
-0.216
(0.291)
assetshare
0.286*
(0.011)
0.276*
(0.014)
-0.0114
(0.941)
-0.0123
(0.939)
0.220
(0.127)
0.205
(0.152)
-0.203
(0.086)
-0.206
(0.092)
-0.0000492
(0.776)
-0.000308
(0.186)
-0.000229
(0.261)
-0.000362
(0.061)
0.00000249
(0.689)
0.0000140
(0.127)
0.00000881
(0.306)
0.0000154
(0.085)
inflation
gdpc
fbassetshare
-0.000115
(0.275)
0.00000115
(0.817)
N
R-sq
adj. R-sq
0.0000114
(0.092)
-0.0383
(0.651)
fbnumber
_cons
-0.000338*
(0.028)
0.000615***
(0.000)
-0.0000240**
(0.006)
0.000869***
(0.001)
-0.0000376**
(0.004)
0.427**
(0.004)
-0.00135*
(0.030)
0.0298
(0.774)
0.00392**
(0.003)
-0.112
(0.530)
-0.00111
(0.225)
-0.00136
(0.155)
-0.00215
(0.755)
-0.00286
(0.676)
0.0153
(0.163)
0.0160
(0.170)
-0.000581
(0.953)
-0.00145
(0.883)
-0.00601
(0.438)
-0.00634
(0.411)
139
0.424
0.379
139
0.431
0.386
144
0.321
0.275
144
0.308
0.262
144
0.591
0.560
144
0.593
0.562
144
0.151
0.094
144
0.153
0.096
p-values in parentheses
* p<0.05, ** p<0.01, *** p<0.001
.
22
Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
Table 7 Privately owned commercial banks with minor foreign share (POCBs)
(1)
profit
(2)
profit
cost
0.412
(0.220)
0.412
(0.229)
equity
0.0634**
(0.007)
0.0628**
(0.010)
deposit
0.00282
(0.272)
0.00252
(0.306)
loan
0.00139
(0.870)
0.00186
(0.817)
0.0205***
(0.000)
0.0203***
(0.000)
llpro
-0.514**
(0.007)
-0.510**
(0.006)
0.0507
(0.384)
nonincome
0.247
(0.059)
0.238
(0.057)
assetshare
0.249
(0.091)
0.243
(0.101)
-0.000219
(0.332)
-0.000225
(0.455)
-0.00000250
(0.645)
-0.00000234
(0.801)
inflation
gdpc
fbassetshare
0.0513
(0.482)
fbnumber
_cons
N
R-sq
adj. R-sq
(3)
cost
(4)
cost
(5)
margin
(6)
margin
(7)
nonincome
(8)
nonincome
1.794**
(0.002)
1.818**
(0.002)
0.00899
(0.977)
0.0228
(0.940)
0.00718
(0.462)
0.00769
(0.424)
0.0415
(0.094)
0.0394
(0.086)
0.0121
(0.321)
0.0155
(0.186)
-0.00235
(0.256)
-0.00231
(0.295)
0.000371
(0.948)
0.000652
(0.884)
-0.00289
(0.535)
-0.00120
(0.780)
-0.00392
(0.735)
-0.00398
(0.688)
0.000712
(0.895)
-0.00198
(0.717)
0.0415
(0.450)
-0.0606
(0.751)
-0.0205
(0.891)
0.213
(0.141)
0.196
(0.177)
0.00323
(0.976)
0.00780
(0.939)
-0.832*
(0.011)
-0.846**
(0.005)
-0.136
(0.066)
-0.135
(0.062)
0.155
(0.288)
0.160
(0.276)
0.0406
(0.713)
0.0787
(0.496)
-0.000301
(0.508)
-0.000606
(0.166)
-0.000312*
(0.035)
-0.000334
(0.088)
0.00000884
(0.529)
0.0000230
(0.095)
0.0000118*
(0.031)
0.0000133
(0.125)
0.000206**
(0.008)
0.00000250
(0.473)
0.000265*
(0.014)
-0.000000240
(0.951)
0.0104
(0.851)
0.000276
(0.761)
-0.118
(0.638)
0.000371
(0.373)
-0.289*
(0.018)
-0.00229
(0.099)
-0.00185
(0.095)
-0.000929
(0.863)
-0.00105
(0.843)
0.00217
(0.496)
0.00240
(0.466)
0.00160
(0.766)
0.000479
(0.926)
0.00565
(0.304)
0.00632
(0.306)
92
0.466
0.400
92
0.465
0.399
96
0.541
0.493
96
0.543
0.495
96
0.559
0.507
96
0.567
0.516
96
0.165
0.078
96
0.128
0.037
p-values in parentheses
* p<0.05, ** p<0.01, *** p<0.001
.
23
Proceedings of Global Business and Finance Research Conference
5-6 May, 2014, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-50-4
24