Author Identifier (ORCID)
Abstract
This study investigates how an unprecedented systemic shock, the COVID-19 pandemic, reshaped bank productivity and intermediation efficiency in Vietnam, one of the fastest-growing emerging economies. We develop a novel risk-adjusted total factor productivity (TFP) measure based on the by-production Luenberger–Hicks–Moorsteen (LHM) indicator, which incorporates non-performing loans as undesirable outputs to better capture credit-risk dynamics. Using a balanced panel covering both the pre-pandemic and pandemic periods (2016–2022), our results show that Vietnamese banks experienced a general decline in productivity before and during COVID-19, driven largely by reductions in technical and scale efficiency. However, foreign and state-owned banks recorded stronger technological progress during the pandemic, reflecting accelerated digital transformation and operational adjustment. Regression results reveal a positive relationship between the COVID-19 period and productivity, suggesting that crisis-driven innovation and policy intervention helped offset negative shocks. Conversely, credit growth, loan-loss provisioning, bank size, and deposit dependence are all negatively associated with productivity, underscoring the importance of prudent risk management, optimal scale, and funding diversification for sustaining performance under stress.
Keywords
banking sector, By-production Luenberger–Hicks–Moorsteen TFP indicator, COVID-19 pandemic, undesirable outputs, Vietnam
Document Type
Journal Article
Date of Publication
1-1-2026
E-ISSN
14664283
ISSN
00036846
Publication Title
Applied Economics
Publisher
Taylor & Francis
School
School of Business and Law
RAS ID
100645
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Recommended Citation
Nguyen, V., Le, P. T., Mavi, R. K., & Arjomandi, A. (2026). Crisis, credit risk, and productivity: Lessons from the Vietnamese banking sector during COVID-19. Applied Economics. Advance online publication. https://doi.org/10.1080/00036846.2026.2722303