Abstract
This paper investigates how market concentration affects bank lending in Vietnam, utilizing an unbalanced panel of 28 commercial banks from 2007 to 2023. Results indicate that greater market concentration enhances bank lending, implying dominant banks use their market power to expand credit. Quantile regression reveals this effect is stronger among banks with high loan growth, underscoring the significance of economies of scale, stable funding sources, and relationship banking in facilitating credit expansion within a concentrated banking sector. Bank-specific factors such as profitability, funding diversification, and CASA ratio also significantly drive loan growth. Robustness checks using Herfindahl-Hirschman indexes based on total loans and deposits confirm these outcomes. Contrary to traditional competition theory, the findings suggest that concentration can foster credit expansion in Vietnam’s banking sector. Notably, the positive concentration-lending nexus is more substantial in higher loan growth quantiles, indicating heterogeneous effects across the credit supply distribution. The study incorporates key macroeconomic variables—GDP growth, inflation, and the COVID-19 pandemic to offer a comprehensive view of Vietnam’s lending landscape. These insights contribute to shaping competition policies and banking reforms in emerging markets, providing empirical support for the relationship between market structure and credit dynamics in transitional economies.