The Impact of Merger Activities on Bank Risk-Taking and Operational Efficiency: Evidence from Vietnam

Abstract

This study investigates the impact of mergers and consolidations on bank risk-taking and operational efficiency in Vietnamese commercial banks from 2007 to 2019. Using a difference-in-differences model, we analyze data from 24 banks. Our findings reveal that the effects of consolidation were most pronounced before the implementation of Basel II in February 2016, particularly during the 2007–2015 period. Post-merger, acquiring banks exhibit significantly reduced risk-taking, while operational efficiency remains largely unchanged. These results suggest that Vietnam has effectively leveraged mergers to enhance banking stability. The country’s approach, particularly the role of state-owned joint-stock banks in restructuring, provides valuable insights for other developing economies with limited resources for banking sector reforms.