Abstract
The study selected nine state-owned banks in Taiwan that went on privatization in 1998 and foreign banks with similar assets scales and more branches in Taiwan as sample. Data Envelopment Analysis (DEA) is applied to explore the variation condition of efficient values for the periods between 1995 and 2007, prior and after each state-owned bank became privatized. To avoid data bias, the years affected by financial storm (from 2008 to 2010) were eliminated. Empirical results of the study are: The number of branches and assets return ratio are positively correlated to overall technical efficient value; savings and government holding ratio are negatively correlated to overall technical efficient value, showing that government releasing stock holdings through privatization can actually improve bank operating efficiency. The result of MannWhitney non-parametric examinations show that: Before the state-owned banks in Taiwan privatized, their average operating efficiency is significantly lower than that of foreign owned banks. After privatization, there is no significant difference in operating efficiency between state-owned and foreign-owned banks, revealing that privatization has effect of enhancing operating efficiency in public banks.
Highlights
In facing the growing trend of globalization and following the promotion of regional economic organization of World Trade Organization (WTO), every nation went on to lift all kind of monetary limitation one after another to increase internationalization and financial liberalization
Data Envelopment Analysis (DEA) empirical analysis and comparison: Through DEA analysis on efficiency value of privatized stateowned banks, the empirical result is that total technical efficiency value of Chang-Hwa Bank, First Bank, HwaNan Bank, Chiao Tung Bank, Kaohsiung Bank and Cooperative Bank is significantly higher than the one before privatization
Take the changes in operating efficiency value of Chiao Tung Bank during privatization as example, with privatization basis of year 1999 as dividing point; the average total technical efficiency value for period from 1995 to 1998 is 0.6335, which is far lower than the average efficiency value of 0.974 for the years from 1999 to 2005
Summary
In facing the growing trend of globalization and following the promotion of regional economic organization of World Trade Organization (WTO), every nation went on to lift all kind of monetary limitation one after another to increase internationalization and financial liberalization. Cross-national operations and competition in financial industry will be more intense. The evidence suggests that privatization has led to improved performance by firms such as the National Freight Corporation, Cable, and Wireless, which operate in a relatively competitive environment (Yarrow, 1986). Under the impact of global financial liberalization, every nation has actively promoted privatization of state-owned business. The study of Mahboobi (2000) found that there are approximately 80 nations promoting policy of privatize state-owned business like wildfire that even many communist nations have followed suit
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