Competition, Size and Risk in Banking Industry: A Case Study of Vietnam

Abstract

This study analyzes the impact of competition and size on profit volatility of Vietnamese commercial banks. Quarterly data for the period from Q1.2008 to Q4.2019 are collected from the financial statements of 17 listed banks and the panel data regression method is employed to conduct the estimation. Research results show that the higher the competition, the higher the risks that banks face, but the scale of operations helps banks stabilize profits and reduce risks. A new and important finding of this study is that the impact of competition on risk depends on size of banks. Increase in bank size can ease the effect of competition on banks’ profit volatility. From the results, some policy implications are suggested to help the banking industry to operate stably and develop sustainably.