Abstract
This study evaluates the performance of the financial industry with meta-frontier (MF) dynamic network data envelopment analysis (DN-DEA) from 2009 to 2015. We divide the sample into two groups, Financial Holding group (FHG) and Insurance & Securities group (ISG), for all decision making units (DMUs) of the financial industry. Our goal is to study the effects of operating performance across divisions and across periods and to compare the differences between these two different groups within Taiwan’s bank industry. We find the best business performance was during 2013, where the average value was 0.5485. The best average value of FHG was 0.7192 in 2012, and ISG was 0.7099 in 2010. FHG has best average overall efficiency (OE) value in 2009–2015 periods. However, the average technical efficiency gap ratio (TGR) value of ISG’s (0.7490) is larger than FHG (0.6959), indicating that business performance is affected by group and meta-frontier. FHG has a larger scale than ISG, and so, those firms can input a relatively large proportion of investments and resources to produce better performance. Finally, many DMUs have excess inputs of labor costs and operating expenses, resulting in an average TGR value that is lower than ISG in 2009–2015.
Highlights
The financial industry is a strong symbol of economic development for countries or regions, as their business performance impacts the flow and activation of funds
The difference between our research method and previous research are as follows: (a) they focus on banks, but we focus on the financial industry, including financial holdings, insurance and securities; (b) they use loans as undesirable output, we use net profit as desirable output; (c) their technology gap ratio (TGR) is defined as enabling a greater understanding of the bank efficiency improvement potential and measuring the technology gap between the group frontier and non-convex meta-frontier technology, our TGR is used to find the difference between financial holdings (FHG) and insurance and securities (ISG)
We find that Chinatrust in the meta-frontier is in Group A, but changes to Group C in Financial Holding group (FHG) group-frontier; TCHC in the meta-frontier is in Group B, but changes to Group C in FHG group-frontier; CSC in the meta-frontier is in Group C, but changes to Group B in Insurance & Securities group (ISG) group-frontier; TaiShin, CRI, TFI, MLI, and Tachong in the meta-frontier are in Group C, but change to Group D in ISG group-frontier; and ShinKong in the meta-frontier is in Group D, but changes to Group C in FHG group-frontier
Summary
The financial industry is a strong symbol of economic development for countries or regions, as their business performance impacts the flow and activation of funds. This industry dominates the funding needs of many listed companies or for general business transactions and provides a number of commodities and derivatives for the public. With the progress of information technology, the change of economic situations, and the evolution of market participants’ needs, the trading environment and the financial industry have been constantly updated, leading to the growth and decline of companies. Future financial problems may not be due to a lack of effort or from major mistakes being made, but rather from a failure at dealing with rapid changes in the external environment by not adjusting a development strategy in the process of business
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