Effects of Derivatives and Market Power on Bank Performance: Evidence from Vietnam

Abstract

This research is a first attempt to investigate how market power and derivatives affect bank performance in Vietnam. We used Generalized Linear Models to examine a sample of 25 Vietnamese commercial banks between 2010 and 2020. Our findings show that utilizing derivatives empowers bank performance in Vietnam. Additionally, we discover that the performance of banks is positively but marginally impacted by market power. Furthermore, the results indicate that market power and bank performance have a non-linear connection. The main findings are robust after employing Robust Least Squares estimations. Our findings are consistent with the market power and diversity theories. Finally, bank managers and policymakers in Vietnam can use our findings to develop sustainable banking performance.