The Impact of Competition and Industry Concentration on Profitability: Evidence from the Vietnamese Banking Industry

Research evaluates the impact of competition through Lerner competitiveness indexes and the concentration of the banking industry on profitability of commercial banks based on the regression of array data of 21 Vietnamese commercial banks in the period of 2013 – 2021. The research results show that the Lerner index is positively correlated with the profitability of the banks. So that, in a fiercely competitive environment, the banks have to spend a lot of money to innovate, to apply modern technology in banking operations, to improve product features, and reduce service prices to compete more effectively. This reduces the profit and profitability of the bank. At the same time, the research results also show that industrial concentration is negatively correlated with the bank’s profitability. Besides, the research results also show that bank size and economic growth rate are positively correlated with the bank’s profitability; while the bad debt ratio, the credit risk provisioning balance, and the leverage ratio are negatively correlated with the bank's profitability.