Determinants of productivity in Vietnamese commercial banks

Abstract

Abstract: In the context of globalization and increasingly expanding economic integration, when traditional
advantages such as cheap human resources and raw material costs gradually disappear, to strengthen
competitiveness and sustainable development, improving labor productivity is becoming an urgent issue for
the Vietnamese economy. The banking system plays an important role, being the capital circulation circuit
of the economy, however, in Vietnam currently, there is very little empirical research on labor productivity
and factors affecting labor productivity within commercial banks. Therefore, the paper aims to investigate
macroeconomic determinants (institutional quality, inflation, financial development, trade openness, and
financial openness) and microeconomic determinants (salary and ownership) of productivity in Vietnamese
commercial banks during 2014-2023. There are some main findings as follows. First, increased salaries and
bonus would lead to higher productivity, especially in private-owned banks. Second, state ownership has
a negative impact on productivity in commercial banks, while higher private ownership will lead to higher
productivity in commercial banks. Third, macroeconomic determinants such as institutional quality, inflation,
and financial developments positively impact bank productivity in the context of price stability . However, we
found that the relationship between institutional quality and bank productivity is different for different types
of ownership. Last, it is proved that trade openness is found to have a negative impact on bank productivity,
while financial openness is a very important factor in bank productivity.