Bank efficiency, market structure and strategic interaction: Evidence from Vietnam

Abstract

This study investigates the impacts of Vietnamese banks’ efficiency on the strategic interactions with their rivals. The study argues that efficient banks will compete the market to grow, and then become more responsive to the strategies from their rivals. The study extends the Efficiency Structure theory to capture the behaviours of banks after the evolvement of market structure as the result of efficiency improvement. The study further argues that the speed of growth plays a key role in moderating the relationship between efficiency and strategic interaction. The study finds evidence that the impact of efficiency on strategic interaction is stronger at the lower level of growth.