Bank restructuring and bank efficiency - the case of VietNam

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY NGUYEN HUU HUAN BANK RESTRUCTURING AND BANK EFFICIENCY - THE CASE OF VIETNAM DOCTORAL THESIS IN ECONOMICS Ho Chi Minh City – 2019 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY NGUYEN HUU HUAN BANK RESTRUCTURING AND BANK EFFICIENCY - THE CASE OF VIETNAM Industry: Banking and Finance Industry ID: 93.40.201 DOCTORAL THESIS IN ECONOMICS Instructor: AsPro.Dr Tran Huy Hoang AsPro.Dr Vo Xuan Vinh Ho Chi Minh City – 2019 i STATEMENT OF AUTHORSHIP I’m hereby declare that this submission is my own work and except where due reference is made; this thesis contains no material previously published or written by another person(s) This thesis does not contain material extracted in the whole or in part from thesis or report presented for another degree of diploma in University of Economics Ho Chi Minh city or in any other education institution Nguyen Huu Huan July 2019 ii TABLE OF CONTENT STATEMENT OF AUTHORSHIP i LIST OF TABLES vi LIST OF FIGURES vii ABBREVIATION viii ABSTRACT ix TÓM TẮT LUẬN ÁN x CHAPTER INTRODUCTION .1 1.1 OVERVIEW 1.2 MOTIVATIONS AND RESEARCH QUESTIONS 1.2.1 The method of bank restructuring .3 1.2.2 The structure and performance relationship in the banking system .4 1.3 RESEARCH OBJECTIVES .5 1.4 DATA AND METHODOLOGY 1.4.1 Data .6 1.4.2 Methodology .6 1.5 STRUCTURE OF THE THESIS CHAPTER LITERATURE REVIEW 2.1 INTRODUCTION 2.2 BACKGROUND 2.2.1 Background knowledge about restructuring .8 2.2.2 Efficiency Theory .16 2.2.3 The related hypothesis 22 iii 2.3 METHOD OF BANK RESTRUCTURING AND EFFICIENCY .24 2.3.1 The relationship between bank restructuring and efficiency 24 2.3.2 Bank restructuring methods and bank efficiency .28 2.4 THE STRUCTURE AND PERFORMANCE RELATIONSHIP IN BANKING SYSTEM 33 2.5 CHAPTER SUMMARY .37 CHAPTER BANK RESTRUCTURING - THE CASE OF VIETNAM 40 3.1 INTRODUCTION OF THE BANKING SYSTEM- THE CASE OF VIETNAM 40 3.1.1 Context 40 3.1.2 Introduction of the Bank Restructuring in Vietnam 41 3.1.3 Types of bank restructuring in Vietnam 43 3.1.3.1 The change of bank ownership 43 3.1.3.2 Vietnam’s bank restructuring 47 3.1.3.3 M&A Domestic banks sections 50 3.1.3.4 Establishment of Asset Management Company 57 3.1.3.5 Loosen room for foreign investors 59 3.2 CHAPTER SUMMARY .61 CHAPTER DATA AND METHODOLOGY 62 4.1 INTRODUCTION .62 4.2 DATA AND SAMPLE 62 4.3 METHODOLOGY FOR RQ1, RQ2 67 4.3.1 Data Envelopment Analysis .68 4.3.1.3 The Three-Stage Data Envelopment Analysis .71 4.3.1.4 Conclusion 72 4.3.2 Model 72 iv 4.3.2.1 RQ1: The effect of restructuring methods on banking performance 72 4.3.2.2 RQ2: The effects of reform to structure and performance .74 4.3.3 Variables and descriptive statistics 76 4.3.3.1 Variables .76 4.3.3.2 Descriptive statistic 80 4.4 ROBUSTNESS TEST 84 4.4.1 SFA regression 84 4.4.2 Hausman test 86 4.5 CHAPTER SUMMARY .87 CHAPTER RESULTS AND DISCUSSION OF THE RESULTS 89 5.1 INTRODUCTION .89 5.2 EMPIRICAL RESULTS FOR RQ1 89 5.2.1 Stage 1: Initial results .89 5.2.2 Stage 3: DEA results on adjusted data .97 5.3 EMPIRICAL RESULTS FOR RQ2 99 CHAPTER SUMMARY 105 CHAPTER CONCLUSION 107 6.1 INTRODUCTION .107 6.2 REVIEW OF RESEARCH QUESTIONS, HYPOTHESES AND FINDINGS .107 6.2.1 RQ1: How restructuring measures, which were introduced as the government intervention, merger and acquisition of the commercial banks and privatization of the state-owned commercial banks, affect the performance of the commercial banks in the studied period? .107 6.2.2 RQ2: What are the effects of reform on Vietnam's commercial bank structure and performance? 108 6.3 CONTRIBUTIONS 109 6.4 IMPLICATIONS .110 v 6.5 LIMITATIONS 111 6.6 FUTURE RESEARCH DIRECTIONS .111 PUBLICATION 113 REFERENCES 114 APPENDIX 125 APENDIX A - List of banks in the study 125 APPENDIX B - Model for testing the relationship of bank restructuring and efficiency 126 APPENDIX C - Model for testing on structure and performance 129 vi LIST OF TABLES Table 2.1: Summary of the two research questions and their hypotheses 38 Table 3.1: Types of bank in 2003-2007 42 Table 3.2: Joint stock commercial bank after 2007 44 Table 3.3: The operational status of state bank before and after privatization 45 Table 3.4: Banks self-restructured successfully 47 Table 3.5: Result after banking restructuring 48 Table 3.6: M&A of Vietnamese banks .50 Table 3.7: Result after banking after the merger of the authorized capital .51 Table 3.8: Banking bond and bad debt statement in 2013 and 2014 57 Table 4.1: Restructuring measures of Vietnamese banks 63 Table 4.2: The control variables include six country specific factors and bank characteristic 78 Table 4.3: Variables and definition in using model of testing structure and performance of banking system 79 Table 4.4 Descriptive statistics of step and step DEA’s variables .81 Table 4.5: Variables used to estimate the structure-performance interaction 82 Table 5.1: SFA regression step 95 Table 5.2: Condition numbers - testing for multicollinearity 100 Table 5.3: Hausman test results 100 Table 5.4: Market-power vs efficient-structure .101 Table 5.5: Necessary condition estimation for ES hypothesis in stage .102 Table 5.6: The quiet life hypothesis-estimation 103 vii LIST OF FIGURES Figure 3.1 Result after the merger of the authorized capital………………………55 Figure 3.2 Result after banking consolidation and merger in 2015……………….57 Figure 5.1 Average banking efficiency scores in step and step DEA 90 Figure 5.2 The comparing of performances between non-restructured banks and restructured banks) 92 viii ABBREVIATION 2SLS: Two-stage least squares CBs: Commercial banks DEA: Data Envelopment Analysis DMU: Decision unit ESS: Scale-efficiency hypothesis ESX: X-efficiency hypothesis GLS: Generalized least squares IMF: International monetary fund NPL: Non performing loan OLS: Ordinary Least Square QLH: Quiet-life hypothesis RMP: Relative market power ROA: Return on asset ROE: Return on Equity RQ1: Research question RQ2: Research question SBV: State Bank of Vietnam SCP: Structure, Conduct and Performance paradigm SEFF: Scale-efficient hypothesis SFA: Stochastic Frontier Analysis VAMC: Vietnam Asset Management Company XEFF: X-Efficiency 122 Musara, M., & Fatoki, O (2010) Has technological innovations resulted in increased efficiency and cost savings for banks' customers? 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Applied Financial Economics, 5(4), 257-264 125 APPENDIX APENDIX A - List of banks in the study 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 An Binh Commercial Joint Stock Bank (ABBANK) Asia Commercial Bank (ACB) Eastern Asia Commercial Joint Stock Bank (DongABank) Viet nam Export – Import Commercial Joint Stock Bank (EIB) HD Bank HSCB Bank LienViet Post Commercial Joint Stock Bank Maritime Commercial Joint Stock Bank (Maritimebank) OCEAN Commercial Joint Stock Bank (Oceanbank) Military Commercial Joint Stock Bank (MBB) Vietnam Development Bank (VDB) Vietnam International Commercial Bank (VIB Bank) Vietnam Prosperity commercial joint-stock bank (VPBank) Vietnam Technological and Commercial Bank (Techcombank) Saigon-Hanoi Commercial Joint Stock Bank (SHB) SaiGonThuong Tin Commercial Joint-stock Bank (Sacombank) Southern Commercial Joint Stock Bank (Southernbank) outheast Asia Commercial Joint Stock Bank (SeAbank) Saigon Commercial Bank (SCB) Saigon Bank For Industry And Trade (Saigonbank) Industrial and Commercial Bank of Vietnam (Vietinbank) Bank For Investment And Development Of Vietnam (BIDV) Bank for Foreign Trade of Vietnam (Vietcombank) Mekong Delta Housing Development Bank (MHB) Vietnam Bank for Agriculture and Rural Development (Agribank) Hanoi Building Joint-stock Commercial Bank (Habubank) 126 APPENDIX B - Model for testing the relationship of bank restructuring and efficiency Log likelihood = Prob > chi2 Wald chi2(7) -509.5468 Std Err z = = P>|z| 0.0000 2.36e+08 totalloan Coef [95% Conf Interval] ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth 1.723525 3.009368 1.254408 69.15366 2134821 -38.77375 -11.18154 2231217 0483719 4161118 2732049 3350119 0455895 1.516109 0194998 0058619 4.14 11.02 3.74 4.68 -7.38 11.44 8.25 0.000 0.000 0.000 0.000 0.000 0.000 0.000 9079606 2.473896 5977968 1241283 -14.15306 1849028 0368827 2.539089 3.54484 1.911019 3028358 -8.210019 2613406 059861 _cons -8.254775 2.454585 -3.36 0.001 -13.06567 -3.443877 _cons -1.47448 1786367 -8.25 0.000 -1.824602 -1.124359 Frontier Usigma Vsigma sigma_u sigma_v lambda Log likelihood = 016125 4784325 0337037 01979 0427328 0445473 0.81 11.20 0.76 0.415 0.000 0.449 Prob > chi2 Wald chi2(4) -53.3228 noninterestrevenue 0014549 4015991 -.0536074 Coef Std Err z P>|z| 1787194 5699655 1210148 = = 0.0000 1.68e+10 [95% Conf Interval] Frontier ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth -.5843642 5949205 367844 59.47478 -.1144767 -35.05525 7952452 -.0094052 -.0286525 0001595 3730.32 0000246 -4658.17 0000261 -360.44 4.43e-06 -6466.13 0.000 0.000 0.000 0.000 5946079 -.1145248 -.0094564 -.0286612 5952331 -.1144285 -.0093541 -.0286438 _cons -.6149914 2279215 -2.70 0.007 -1.061709 -.1682734 _cons -29.67793 158.0092 -0.19 0.851 -339.3703 280.0145 Usigma Vsigma sigma_u sigma_v lambda 735286 3.59e-07 2046146 0837938 0000284 0837937 8.77 0.01 2.4e+07 0.000 0.990 0.000 5881021 2.03e-74 2046146 9193056 6.37e+60 2046146 127 Log likelihood = -72.4772 Wald chi2(8) Std Err z = P>|z| 205.80 interestrevenue Coef [95% Conf Interval] ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth 1.567048 1.112031 -.0364539 58.75496 -.1118735 -38.26057 -4.01676 0230249 -.0290335 502845 5519707 3549319 0333228 5.900356 1.809068 0289081 0084242 3.12 2.01 -0.10 -3.36 -6.48 -2.22 0.80 -3.45 0.002 0.044 0.918 0.001 0.000 0.026 0.426 0.001 5814895 0301879 -.7321077 -.1771851 -49.82505 -7.562467 -.033634 -.0455447 2.552606 2.193873 6591998 -.046562 -26.69609 -.4710531 0796839 -.0125224 _cons -8.259371 6.14147 -1.34 0.179 -20.29643 3.777689 _cons -1.114005 2336662 -4.77 0.000 -1.571982 -.6560275 Frontier Usigma Vsigma sigma_u sigma_v lambda Log likelihood = 0160879 5729239 0280804 0494018 0669365 0839903 0.33 8.56 0.33 0.745 0.000 0.738 0000391 4556679 -.1365376 Prob > chi2 Wald chi2(7) -156.0940 Std Err z P>|z| 6.611725 7203531 1926984 = = 0.0000 8.25e+06 totaldeposit Coef [95% Conf Interval] ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth 1.848791 1.999474 1.126487 54.59113 0088172 -52.83027 -9.533401 2398265 0651225 992321 6644424 7416781 0770705 4.16181 0756418 0292208 1.86 3.01 1.52 0.11 -2.29 3.17 2.23 0.062 0.003 0.129 0.909 0.022 0.002 0.026 -.0961222 6971909 -.3271752 -.1422382 -17.6904 0915712 0078508 3.793705 3.301757 2.580149 1598725 -1.376404 3880818 1223943 _cons -6.858058 2.827802 -2.43 0.015 -12.40045 -1.315667 _cons 2517573 5120679 0.49 0.623 -.7518773 1.255392 Frontier Usigma Vsigma sigma_u sigma_v lambda 0324184 1.134145 028584 0458364 2903795 2867232 0.71 3.91 0.10 0.479 0.000 0.921 002029 6866444 -.5333831 5179724 1.873289 5905511 128 Log likelihood = Prob > chi2 Wald chi2(5) -14.8508 noninterestexpense Coef Std Err z = = P>|z| 0.0000 7.44e+11 [95% Conf Interval] Frontier ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth 6413692 -.0936247 2266742 1028433 -.0886737 -21.81918 1.089017 -.0219695 -.0271108 0000341 0000719 8.74e-06 7.50e-06 1.38e-06 -2745.51 3153.46 -1.0e+04 -2927.53 -2.0e+04 0.000 0.000 0.000 0.000 0.000 -.0936915 2265333 -.0886908 -.0219842 -.0271135 -.0935579 2268151 -.0886566 -.0219548 -.0271081 _cons -1.65057 2169305 -7.61 0.000 -2.075746 -1.225394 _cons -31.82879 132.1172 -0.24 0.810 -290.7738 227.1162 Usigma Vsigma sigma_u sigma_v lambda Log likelihood = 4381101 1.23e-07 3573690 0475197 8.10e-06 0475197 9.22 0.02 7.5e+07 0.000 0.988 0.000 3542073 7.23e-64 3573690 Prob > chi2 Wald chi2(9) -103.6718 Std Err z P>|z| 5418874 2.08e+49 3573690 = = 0.0000 565.03 interestexpense Coef [95% Conf Interval] ma si cop growth realinterestrate fiscalsurplusgdp changeintermsoftrade npl realdomesticcreditgrowth 1.776933 2.133488 2624511 64.42692 -.1098786 -37.49864 -7.094377 0986949 -.0022067 7466254 5917036 5303812 9.910549 0485585 9.377595 2.606738 0354996 0150924 2.38 3.61 0.49 6.50 -2.26 -4.00 -2.72 2.78 -0.15 0.017 0.000 0.621 0.000 0.024 0.000 0.006 0.005 0.884 3135739 9737703 -.777077 45.0026 -.2050515 -55.87839 -12.20349 029117 -.0317872 3.240292 3.293206 1.301979 83.85124 -.0147057 -19.1189 -1.985265 1682727 0273738 _cons -7.467075 4.013247 -1.86 0.063 -15.33289 3987455 _cons -.3202056 2374034 -1.35 0.177 -.7855077 1450964 Frontier Usigma Vsigma sigma_u sigma_v lambda 0239081 8520562 0280593 0479746 1011405 1100208 0.50 8.42 0.26 0.618 0.000 0.799 0004683 6751949 -.1875775 1.220637 1.075245 2436961 129 APPENDIX C - Model for testing on structure and performance Hausman Test Execution Dependent Stage Variable Stage Model 1: Market structure and performance hypothesis and relative market power hypotheses testing Coefficients (b) (B) fe re ROA herf ms sineff xineff la ka year -.0355345 0216262 -.0150314 -.0093205 0024168 0673252 000615 -.0176601 0015352 -.0354458 -.0042595 0032737 056183 0007105 (b-B) Difference sqrt(diag(V_b-V_B)) S.E -.0178743 0200911 0204144 -.0050611 -.0008569 0111422 -.0000955 0091966 0096053 0072389 0024245 0041206 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic Coefficients (b) (B) fe re herf ms sineff xineff la ka year -.0166797 0100557 -.0426981 0255272 0085752 0568706 -.0009097 Coefficients (b) (B) fe1 re1 herf ms sineff xineff la ka year -10.03555 -1.739477 2.437319 -1.022181 -.6472157 7053506 -.1672568 -6.68437 -2.685584 -.414674 -.5276609 -.9285473 2137022 -.1335933 0176109 0530377 0179009 0166388 0029331 0056144 000106 chi2(7) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 14.92 Prob>chi2 = 0.0371 (V_b-V_B is not positive definite) sqrt(diag(V_b-V_B)) S.E -3.351177 9461062 2.851993 -.4945196 2813316 4916484 -.0336635 2.530796 2.958796 3.820092 2.917422 1.034664 1.399954 0412352 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg chi2(7) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 47.97 Prob>chi2 = 0.0000 -.0044507 0028163 0091567 -.0055226 0036764 -.0162259 -.0001294 Test: Ho: difference in coefficients not systematic (b-B) Difference Test: Ho: difference in coefficients not systematic sqrt(diag(V_b-V_B)) S.E b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg chi2(7) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 46.05 Prob>chi2 = 0.0000 (V_b-V_B is not positive definite) ROE -.012229 0072394 -.0518549 0310498 0048988 0730965 -.0007803 (b-B) Difference Coefficients (b) (B) fe1 re1 herf ms sineff xineff la ka year -.4357955 3192645 -.7267823 4848769 0347888 -.1102292 -.01444 -.3991579 3781378 -.7243753 4206718 0161601 -.070256 -.0133313 (b-B) Difference sqrt(diag(V_b-V_B)) S.E -.0366377 -.0588732 -.002407 0642051 0186287 -.0399732 -.0011087 2364667 5533194 1881299 1710679 0300179 0607301 0013986 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(7) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 2.63 Prob>chi2 = 0.9170 130 HERF Coefficients (b) (B) fe2 re2 sineff xineff year la ka 0532849 0020883 -.0194881 0062571 0299525 0040353 -.0035416 -.0195577 -.0009269 0098569 (b-B) Difference 0492496 0056298 0000696 0071839 0200956 Coefficients (b) (B) fe2 re2 sqrt(diag(V_b-V_B)) S.E .0478852 0366878 0003958 0139638 0185797 sineff xineff year la ka -.3680696 3296949 -.0063514 0409194 -.0761577 -.3518779 286849 -.0067778 056582 -.0982309 Coefficients (b) (B) re3 fe3 (b-B) sqrt(diag(V_b-V_B)) Difference S.E -.0161918 0428459 0004264 -.0156626 0220731 017407 0168368 0000911 0040591 0100004 chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 22.59 Prob>chi2 = 0.0004 chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 1.87 Prob>chi2 = 0.8662 sineff xineff year la ka 033573 -.0150565 -.0001286 0161694 0039203 Test: Ho: difference in coefficients not systematic Test: Ho: difference in coefficients not systematic Coefficients (b) (B) fe3 re3 0073805 0026064 -.0053177 0081251 0197612 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg MS 0409535 -.0124501 -.0054464 0242945 0236815 (b-B) sqrt(diag(V_b-V_B)) Difference S.E .0468638 0343075 0003087 013656 0236871 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg sineff xineff year la ka -.1925137 1246002 -.0007924 029326 -.0217912 -.2261162 1494795 -.0007675 0218213 -.0023062 (b-B) sqrt(diag(V_b-V_B)) Difference S.E .0336025 -.0248793 -.0000249 0075047 -.0194851 017534 0135342 0001658 0038528 0104009 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic Test: Ho: difference in coefficients not systematic chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 0.68 Prob>chi2 = 0.9839 (V_b-V_B is not positive definite) chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 10.98 Prob>chi2 = 0.0517 Model 2: Quiet-life Hypothesis Testing Coefficients (b) (B) fe4 re4 XINEFF herf ms year la ka 108219 1813088 -.0008095 -.0733179 -.2987633 1503845 0969298 0001146 -.0662357 -.2612067 Coefficients (b) (B) fe4 re4 (b-B) sqrt(diag(V_b-V_B)) Difference S.E -.0421655 084379 -.0009241 -.0070822 -.0375566 0581104 0159645 0106108 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg herf ms year la ka -.0087884 4765336 0050685 0093939 -.153569 0787496 1815321 0058003 -.0016987 -.1536272 (b-B) sqrt(diag(V_b-V_B)) Difference S.E -.0875379 2950015 -.0007318 0110926 0000581 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic Test: Ho: difference in coefficients not systematic chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 15.18 Prob>chi2 = 0.0096 (V_b-V_B is not positive definite) 1258883 0012996 chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 63.69 Prob>chi2 = 0.0000 (V_b-V_B is not positive definite) 131 SINEFF Coefficients (b) (B) re5 fe5 herf ms year la ka 3358774 -.0944605 0068037 0357204 -.2147845 3866774 -.1179144 0069741 0149434 -.2799329 (b-B) Difference sqrt(diag(V_b-V_B)) S.E -.0508 0234539 -.0001703 020777 0651484 1059251 0021908 0085926 Coefficients (b) (B) fe5 re5 herf ms year la ka 4788155 -.7630294 0032427 0263284 0611579 (b-B) sqrt(diag(V_b-V_B)) Difference S.E .3710548 -.0952652 0026667 0268652 0960439 1077607 -.6677642 000576 -.0005369 -.034886 1154691 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic Test: Ho: difference in coefficients not systematic chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 29.07 Prob>chi2 = 0.0000 (V_b-V_B is not positive definite) chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 43.28 Prob>chi2 = 0.0000 (V_b-V_B is not positive definite) Random Effects And Fixed Effects Execution Stage Stage Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 110 22 Random-effects GLS regression Group variable: stt Number of obs Number of groups = = 218 26 R-sq: within = 0.6983 between = 0.0687 overall = 0.3853 Obs per group: = avg = max = 5.0 R-sq: within = 0.1625 between = 0.4111 overall = 0.2405 Obs per group: = avg = max = 8.4 corr(u_i, Xb) F(7,81) Prob > F corr(u_i, X) Wald chi2(7) Prob > chi2 = -0.3288 Std Err t roa Coef herf ms sineff xineff la ka year _cons -.0355345 0216262 -.0150314 -.0093205 0024168 0673252 000615 -1.224516 0378237 0133863 0191366 014762 0052491 0072516 0007471 1.504093 sigma_u sigma_e rho 00735025 00384871 78482236 (fraction of variance due to u_i) -0.94 1.62 -0.79 -0.63 0.46 9.28 0.82 -0.81 P>|t| = = 0.350 0.110 0.434 0.530 0.646 0.000 0.413 0.418 26.78 0.0000 [95% Conf Interval] -.1107918 -.0050084 -.0531071 -.0386922 -.0080273 0528968 -.0008715 -4.217189 F test that all u_i=0: F(21, 81) = 5.23 0397229 0482609 0230444 0200512 0128609 0817536 0021014 1.768157 = (assumed) Std Err z roa Coef herf ms sineff xineff la ka year _cons -.012229 0072394 -.0518549 0310498 0048988 0730965 -.0007803 1.568912 0750633 0192255 0212077 014427 0050094 0134136 0004595 92984 sigma_u sigma_e rho 0037178 00666696 23720536 (fraction of variance due to u_i) -0.16 0.38 -2.45 2.15 0.98 5.45 -1.70 1.69 P>|z| = = 0.871 0.707 0.014 0.031 0.328 0.000 0.089 0.092 50.24 0.0000 [95% Conf Interval] -.1593504 -.030442 -.0934211 0027733 -.0049195 0468064 -.0016809 -.2535408 1348924 0449207 -.0102886 0593263 014717 0993866 0001203 3.391365 Prob > F = 0.0000 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 110 22 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 218 26 R-sq: within = 0.0484 between = 0.2360 overall = 0.1065 Obs per group: = avg = max = 5.0 R-sq: within = 0.1730 between = 0.0185 overall = 0.1139 Obs per group: = avg = max = 8.4 corr(u_i, Xb) F(7,81) Prob > F corr(u_i, Xb) F(7,185) Prob > F = -0.0077 Std Err roe Coef herf ms sineff xineff la ka year _cons -10.03555 -1.739477 2.437319 -1.022181 -.6472157 7053506 -.1672568 337.5712 8.793337 3.112086 4.448907 3.431896 1.220331 1.685866 1736831 349.6748 sigma_u sigma_e rho 43231827 89475587 18926736 (fraction of variance due to u_i) F test that all u_i=0: F(21, 81) = 1.11 t -1.14 -0.56 0.55 -0.30 -0.53 0.42 -0.96 0.97 P>|t| = = 0.257 0.578 0.585 0.767 0.597 0.677 0.338 0.337 0.59 0.7637 [95% Conf Interval] -27.53153 -7.931553 -6.41461 -7.850578 -3.075291 -2.648993 -.5128317 -358.1719 7.460436 4.452598 11.28925 5.806217 1.78086 4.059694 1783181 1033.314 Prob > F = 0.3581 = -0.1069 Std Err t roe Coef herf ms sineff xineff la ka year _cons -.4357955 3192645 -.7267823 4848769 0347888 -.1102292 -.01444 29.1386 81159 5938354 292131 2318145 0611042 1530638 0049637 10.03883 sigma_u sigma_e rho 0497435 07017813 33440827 (fraction of variance due to u_i) -0.54 0.54 -2.49 2.09 0.57 -0.72 -2.91 2.90 F test that all u_i=0: F(25, 185) = 4.05 P>|t| = = 0.592 0.591 0.014 0.038 0.570 0.472 0.004 0.004 5.53 0.0000 [95% Conf Interval] -2.036957 -.8522954 -1.303119 0275371 -.0857618 -.4122042 -.0242328 9.333287 1.165366 1.490825 -.1504458 9422167 1553394 1917458 -.0046472 48.94392 Prob > F = 0.0000 132 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 110 22 Random-effects GLS regression Group variable: stt Number of obs Number of groups = = 218 26 R-sq: within = 0.9405 between = 0.9718 overall = 0.9407 Obs per group: = avg = max = 5.0 R-sq: within = 0.8212 between = 0.7652 overall = 0.8156 Obs per group: = avg = max = 8.4 corr(u_i, Xb) F(5,83) Prob > F corr(u_i, X) Wald chi2(5) Prob > chi2 = -0.0870 Std Err t herf Coef sineff xineff year la ka _cons 0532849 0020883 -.0194881 0062571 0299525 39.24072 0547609 0423044 0005976 0156739 0211564 1.200129 sigma_u sigma_e rho 00486935 01155314 1508443 (fraction of variance due to u_i) 0.97 0.05 -32.61 0.40 1.42 32.70 P>|t| = = 0.333 0.961 0.000 0.691 0.161 0.000 262.34 0.0000 [95% Conf Interval] -.0556323 -.0820535 -.0206766 -.0249177 -.0121266 36.85372 F test that all u_i=0: F(21, 83) = 0.18 162202 08623 -.0182995 0374319 0720317 41.62773 = (assumed) Std Err z herf Coef sineff xineff year la ka _cons 0073805 0026064 -.0053177 0081251 0197612 10.79384 015346 0096972 0001929 0032423 0095533 3872726 sigma_u sigma_e rho 00639293 (fraction of variance due to u_i) 0.48 0.27 -27.56 2.51 2.07 27.87 P>|z| = = 0.631 0.788 0.000 0.012 0.039 0.000 937.95 0.0000 [95% Conf Interval] -.0226971 -.0163999 -.0056958 0017704 001037 10.0348 0374581 0216126 -.0049396 0144799 0384854 11.55288 Prob > F = 1.0000 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 110 22 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 218 26 R-sq: within = 0.2944 between = 0.1043 overall = 0.1018 Obs per group: = avg = max = 5.0 R-sq: within = 0.2930 between = 0.1346 overall = 0.0466 Obs per group: = avg = max = 8.4 corr(u_i, Xb) F(5,83) Prob > F corr(u_i, Xb) F(5,187) Prob > F = 0.0867 Std Err t ms Coef sineff xineff year la ka _cons -.3680696 3296949 -.0063514 0409194 -.0761577 12.75725 1547293 119533 0016884 0442874 0597783 3.391017 sigma_u sigma_e rho 08600226 03264392 8740695 (fraction of variance due to u_i) -2.38 2.76 -3.76 0.92 -1.27 3.76 P>|t| = = 0.020 0.007 0.000 0.358 0.206 0.000 6.93 0.0000 [95% Conf Interval] -.67582 0919486 -.0097096 -.0471663 -.1950543 6.012655 F test that all u_i=0: F(21, 83) = 35.54 -.0603193 5674412 -.0029932 1290052 0427388 19.50185 Prob > F = 0.0000 = -0.3483 Std Err t = = ms Coef sineff xineff year la ka _cons -.2261162 1494795 -.0007675 0218213 -.0023062 1.563113 031715 0265545 0002916 0071 0189017 584294 sigma_u sigma_e rho 05352302 00873717 97404394 (fraction of variance due to u_i) -7.13 5.63 -2.63 3.07 -0.12 2.68 P>|t| 15.50 0.0000 [95% Conf Interval] 0.000 0.000 0.009 0.002 0.903 0.008 -.2886814 0970946 -.0013428 0078148 -.039594 4104584 F test that all u_i=0: F(25, 187) = 142.96 -.1635511 2018644 -.0001923 0358278 0349817 2.715768 Prob > F = 0.0000 Random-effects GLS regression Group variable: stt Number of obs Number of groups = = 110 22 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 218 26 R-sq: within = 0.3408 between = 0.0439 overall = 0.0000 Obs per group: = avg = max = 5.0 R-sq: within = 0.3103 between = 0.0057 overall = 0.0027 Obs per group: = avg = max = 8.4 corr(u_i, X) Wald chi2(5) Prob > chi2 corr(u_i, Xb) F(5,187) Prob > F = (assumed) xineff Coef herf ms year la ka _cons 1503845 0969298 0001146 -.0662357 -.2612067 -.1098049 Std Err .3436103 0996703 0068044 0436361 0503499 13.69999 z sigma_u sigma_e rho 06775411 03511076 78830775 (fraction of variance due to u_i) 0.44 0.97 0.02 -1.52 -5.19 -0.01 P>|z| 0.662 0.331 0.987 0.129 0.000 0.994 = = 33.25 0.0000 [95% Conf Interval] -.5230794 -.0984203 -.0132219 -.1517609 -.3598907 -26.9613 8238483 29228 0134511 0192895 -.1625226 26.74169 = -0.4711 Std Err t = = xineff Coef herf ms year la ka _cons -.0087884 4765336 0050685 0093939 -.153569 -10.08815 299389 1927319 0018201 022793 0542807 3.68309 sigma_u sigma_e rho 06456282 02632508 85744547 (fraction of variance due to u_i) -0.03 2.47 2.78 0.41 -2.83 -2.74 P>|t| 0.977 0.014 0.006 0.681 0.005 0.007 16.82 0.0000 [95% Conf Interval] -.5994023 0963254 001478 -.0355706 -.2606502 -17.35389 F test that all u_i=0: F(25, 187) = 32.18 5818256 8567419 008659 0543584 -.0464879 -2.822402 Prob > F = 0.0000 Random-effects GLS regression Group variable: stt Number of obs Number of groups = = 110 22 Fixed-effects (within) regression Group variable: stt Number of obs Number of groups = = 220 26 R-sq: within = 0.3911 between = 0.1618 overall = 0.0126 Obs per group: = avg = max = 5.0 R-sq: within = 0.1798 between = 0.1861 overall = 0.0889 Obs per group: = avg = max = 8.5 corr(u_i, X) Wald chi2(5) Prob > chi2 corr(u_i, Xb) F(5,189) Prob > F = (assumed) sineff Coef herf ms year la ka _cons 3358774 -.0944605 0068037 0357204 -.2147845 -13.66064 Std Err .2826845 0755141 0056089 0344124 0406126 11.29293 z sigma_u sigma_e rho 0396218 02708452 6815349 (fraction of variance due to u_i) 1.19 -1.25 1.21 1.04 -5.29 -1.21 P>|z| 0.235 0.211 0.225 0.299 0.000 0.226 = = 33.08 0.0000 [95% Conf Interval] -.2181741 -.2424654 -.0041895 -.0317267 -.2943837 -35.79437 8899289 0535444 017797 1031675 -.1351853 8.473094 = -0.8615 Std Err t sineff Coef herf ms year la ka _cons 4788155 -.7630294 0032427 0263284 0611579 -6.528026 2356289 1522052 0014319 0178633 0418474 2.897542 sigma_u sigma_e rho 05811802 02083797 88608878 (fraction of variance due to u_i) 2.03 -5.01 2.26 1.47 1.46 -2.25 F test that all u_i=0: F(25, 189) = 15.06 P>|t| = = 0.044 0.000 0.025 0.142 0.146 0.025 8.28 0.0000 [95% Conf Interval] 0140151 -1.063269 000418 -.0089086 -.0213901 -12.2437 9436159 -.4627901 0060673 0615653 1437058 -.8123481 Prob > F = 0.0000 133 VIF Execution Dependent Variable ROA ROE HERF MS XINEFF SINEFF Stage Stage Variable VIF 1/VIF Variable VIF 1/VIF herf year sineff xineff ms la ka 19.95 19.84 2.35 2.17 1.38 1.36 1.25 0.050134 0.050412 0.424641 0.460818 0.723367 0.734213 0.798853 year herf ms sineff xineff la ka 5.69 5.43 2.08 2.04 1.93 1.73 1.41 0.175607 0.184105 0.480379 0.490137 0.517091 0.578814 0.708057 Mean VIF 6.90 Mean VIF 2.90 Variable VIF 1/VIF Variable VIF 1/VIF herf year sineff xineff ms la ka 19.95 19.84 2.35 2.17 1.38 1.36 1.25 0.050134 0.050412 0.424641 0.460818 0.723367 0.734213 0.798853 year herf ms sineff xineff la ka 5.69 5.43 2.08 2.04 1.93 1.73 1.41 0.175607 0.184105 0.480379 0.490137 0.517091 0.578814 0.708057 Mean VIF 6.90 Mean VIF 2.90 Variable VIF 1/VIF xineff sineff la year ka 1.86 1.72 1.35 1.24 1.08 0.538957 0.580131 0.740180 0.809223 0.926481 Mean VIF 1.45 Variable VIF 1/VIF sineff xineff la ka year 2.35 2.16 1.21 1.07 1.02 0.426331 0.462354 0.826495 0.938072 0.975942 Mean VIF 1.56 Variable VIF 1/VIF Variable VIF 1/VIF sineff xineff la ka year 2.35 2.16 1.21 1.07 1.02 0.426331 0.462354 0.826495 0.938072 0.975942 xineff sineff la year ka 1.86 1.72 1.35 1.24 1.08 0.538957 0.580131 0.740180 0.809223 0.926481 Mean VIF 1.56 Mean VIF 1.45 Variable VIF 1/VIF Variable VIF 1/VIF herf year ms ka la 19.94 19.79 1.38 1.20 1.13 0.050156 0.050523 0.726256 0.832231 0.882075 year herf ms la ka 5.45 5.41 1.75 1.59 1.26 0.183323 0.184936 0.570295 0.629968 0.791246 Mean VIF 8.69 Mean VIF 3.09 Variable VIF 1/VIF Variable VIF 1/VIF herf year ms ka la 19.94 19.79 1.38 1.20 1.13 0.050156 0.050523 0.726256 0.832231 0.882075 year herf ms la ka 5.47 5.44 1.73 1.58 1.27 0.182717 0.183905 0.576566 0.631229 0.787582 Mean VIF 8.69 Mean VIF 3.10 134 A 2SLS Execution Stage ivregress 2sls sineff (ms=L.ms) herf year la ka, small Instrumental variables (2SLS) regression Source SS df MS Model Residual 05187851 280650685 86 010375702 00326338 Total 332529195 91 003654167 sineff Coef ms herf year la ka _cons 0302671 0256058 -.0002923 0816033 2683197 5414847 Instrumented: Instruments: Std Err .0748334 5581079 0112162 0414903 09798 22.58186 Number of obs F( 5, 86) Prob > F R-squared Adj R-squared Root MSE t P>|t| 0.40 0.05 -0.03 1.97 2.74 0.02 0.687 0.964 0.979 0.052 0.008 0.981 = = = = = = 92 3.16 0.0115 0.1560 0.1069 05713 [95% Conf Interval] -.1184967 -1.083876 -.0225894 -.0008766 073542 -44.34976 179031 1.135088 0220048 1640833 4630975 45.43273 ms herf year la ka L.ms ivregress 2sls xineff (ms=L.ms) herf year la ka, small Instrumental variables (2SLS) regression Source SS df MS Model Residual 022472399 41061785 86 00449448 004774626 Total 433090249 91 004759234 xineff Coef ms herf year la ka _cons 0264193 -.2747091 -.0079467 -.0507959 2035502 16.07092 Instrumented: Instruments: Std Err .0905172 6750781 013567 050186 118515 27.31464 ms herf year la ka L.ms t 0.29 -0.41 -0.59 -1.01 1.72 0.59 Number of obs F( 5, 86) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.771 0.685 0.560 0.314 0.089 0.558 = = = = = = 92 0.93 0.4664 0.0519 -0.0032 0691 [95% Conf Interval] -.153523 -1.61672 -.0349169 -.1505624 -.0320498 -38.22879 2063616 1.067302 0190235 0489705 4391501 70.37062 135 Stage ivregress 2sls sineff (ms=L.ms) herf year la ka, small Instrumental variables (2SLS) regression Source SS df MS Model Residual 074120024 194595607 188 014824005 001035083 Total 26871563 193 001392309 sineff Coef ms herf year la ka _cons 4537173 2724843 0035294 -.0235908 3290458 -7.129513 Instrumented: Instruments: Std Err t 0624751 3672989 0020425 0194028 0640629 4.138207 7.26 0.74 1.73 -1.22 5.14 -1.72 Number of obs F( 5, 188) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.000 0.459 0.086 0.226 0.000 0.087 = = = = = = 194 15.06 0.0000 0.2758 0.2566 03217 [95% Conf Interval] 3304751 -.4520726 -.0004999 -.0618661 2026713 -15.2928 5769596 9970412 0075586 0146844 4554204 1.033774 ms herf year la ka L.ms Instrumental variables (2SLS) regression Source SS df MS Model Residual 107915816 576435514 186 021583163 003099116 Total 68435133 191 003582991 xineff Coef ms herf year la ka _cons 18762 6634921 0122365 -.1409412 2165374 -24.51434 Instrumented: Instruments: Std Err .1094473 6410707 0035644 033906 1166372 7.221897 ms herf year la ka L.ms t 1.71 1.03 3.43 -4.16 1.86 -3.39 Number of obs F( 5, 186) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.088 0.302 0.001 0.000 0.065 0.001 = = = = = = 192 7.12 0.0000 0.1577 0.1350 05567 [95% Conf Interval] -.0282977 -.6012122 0052047 -.207831 -.0135644 -38.7617 4035377 1.928196 0192683 -.0740514 4466392 -10.26698 136