Financial Holding Companies Research Articles

Non-radial cost Luenberger productivity indicator

This study decomposes cost inefficiency into technical and allocative components in a more general way based on the directional Russell measure (DRM) of Fukuyama and Weber (2009), with the allocative component being completely clear of technical inefficiency. Based on this decomposition, we develop a cost-oriented productivity indicator, the cost Luenberger productivity indicator (CL), which completely embraces the concept of cost minimization and provides four sources of productivity change: technical efficiency change, the change in allocative efficiency, the shift of technology, and the effect of input price change. To illustrate the above decompositions of cost inefficiency and productivity change and to investigate whether the establishment of a financial holding company (FHC) offers a bank greater operating efficiency and an improvement in productivity change, this study employs data on Taiwan's banking industry covering the period 2006–2012.

A Personal Credit Rating Prediction Model Using Data Mining in Smart Ubiquitous Environments

This study suggests a methodology called a smart ubiquitous data mining (UDM) that consolidates homogeneous models in a smart ubiquitous computing environment. It tests the suggested model with financial datasets. It basically induces rules from the dataset using diverse rule extraction algorithms and combines the rules to build a metamodel. This paper builds several personal credit rating prediction models based on the UDM and benchmarks their performance against other models which employ logistic regression (LR), Bayesian style frequency matrix (BFM), multilayer perceptron (MLP), classification tree methods (C5.0), and neural network rule extraction (NR) algorithms. To verify the feasibility and effectiveness of UDM, personal credit data and personal loan data provided by a Financial Holding Company (FHC) were used in this study. Empirical results indicated that UDM outperforms other models such as LR, BFM, MLP, C5.0, and NR.

The impact of transformation on economic efficiency – a case study of financial holding companies in Taiwan

The present study examines the question of whether the transformation of Taiwan's banks into financial holding companies (FHCs) has led to an improvement in operating efficiency. The results indicate that while comparison of FHCs and banks shows that FHCs are significantly more efficient than non-FHC banks, if the comparison is made in terms of efficiency before and after conversion to FHC status, then no significant increase in total factor productivity (TFP) is seen after conversion to FHC status. The study's results indicate that while the transformation of some Taiwanese banks into FHCs has made these banks more competitive vis-à-vis other, non-FHC banks, the conversion to FHC status has not made any significant contribution towards these banks’ own efficiency growth. Government should keep encouraging the conversion of FHC banks, and, furthermore, stimulate the FHC banks on financial reform and overseas market expansion in order to elevate the efficiency of Taiwan financial industry.

Competitive Analysis of Bank Subordinating Financial Holding Company

Competitive Analysis of Bank Subordinating Financial Holding Company

A study of conversion effect of international financial reporting standards: evidence from Taiwan's banking sector of financial holding company

Financial Holding Companies (FHCs) were established after Taiwan's FHC Act is signed to law in 2001, since then, FHCs have become the mainstream and dominated Taiwan's financial market, meanwhile, the Taiwan government mandated that, effective 1 January 2013, all listed banks should adopt IFRS for the compilation of financial reports. In this paper, we mainly investigate the conversion effect of International Financial Reporting Standards (IFRS) on operational performance confronted by Taiwan's commercial banking established or joining in FHCs during first IFRS adoption. This study first employ network SBM approach to penetrate into the operating field of banks consider internal operational performance which are profitability efficiency and marketability efficiency that examine the impact of IFRS on operational efficiency of Taiwan's commercial banks joining in FHCs. The findings can serve as suggested for banking authorities, competent authorities of banks, and capital market investors.

금융지주회사 CEO리스크의 법적 검토 - KB금융사태를 계기로 -

금융지주회사 CEO리스크의 법적 검토 - KB금융사태를 계기로 -

Effect of Internationalization on the Cost Efficiency of Taiwan’s Banks

:We focus on the effect of internationalization on the cost efficiency of banks by studying Taiwan as a sample for developing countries. We find that (1) increasing overseas businesses and foreign exchange deposits increases cost efficiency; (2) expanding offshore banking units increases bank efficiency; and (3) the profitability of a bank’s overseas branch is not a critical factor behind the differences in cost efficiency across both financial holding company (FHC) banks and non-financial holding company (non-FHC) banks. Finally, our metafrontier empirical results illustrate that FHC banks in Taiwan show better technical performance in cost control than non-FHC banks.

Doing good with or without being known? Media coverage of corporate social performance and its impact on corporate financial performance

Purpose– The purpose of this paper is to examine the media coverage of corporate social performance (CSP), as well as the ultimate impact that such coverage has on the financial performance of corporate entities.Design/methodology/approach– Based on a sample of financial holding companies (FHC) listed on the Taiwan Stock Exchange, the authors select the two most popular newspapers in Taiwan, to construct the unique media coverage of CSP activity database.Findings– First, the quantity of news articles about social activities of FHCs is positively correlated with financial performance. Second, the authors find that news articles about FHCs’ positive social activities for shareholders will trigger a positive evaluation by shareholders; however, news articles about FHCs’ positive (negative) social activities for employees will trigger a negative (positive) evaluation by shareholders. But if the news articles about FHCs’ positive social activities for employees are initiated by the media, rather than by the company itself, they will trigger a positive evaluation by shareholders.Originality/value– The average shareholders may praise management for one particular CSP activity of a positive nature, whereas they may criticize another CSP activity, despite it being generally regarded outside of the firm as also being positive in nature. It therefore becomes clear that when setting out to investigate whether “doing good” actually does translate into “doing well,” the authors should not attempt to total different kinds of information on CSP; In this paper, the authors emphasize that they need to be analyzed separately.

A study on profitability and marketability of Taiwanese bank firms before and after the Financial Holding Company Act

The purpose of this paper is to determine whether the subordinate subsidiary to a financial institution can improve the operating performance by establishing financial holding companies (FHCs) in Taiwan. Current research uses data envelopment analysis (DEA) to measure profitability and marketability changes among 14 banks with subsidiaries as FHCs. The DEA models include the CCR and BCC models, both of which analyse the overall efficiency, technical efficiency, and scale efficiency of banks. We used the bilateral model to measure and compare differences in operating performance before and after implementation of the FHC Act. Results show that except for scale efficiency of profitability, other efficiencies of banks do not improved because of their conglomerate in FHCs; however, inefficiency occurs primarily on scale which is derived from diseconomies of scale. Contrary to the purpose with FHC, the efficiency scores of 2003–2007 were lower than those of 1997–2001. The bilateral model shows that prior to the implementation of the FHC Act, banks demonstrated higher levels of efficiency than banks with FHCs subsidiary. Management implications for the Taiwanese banking industry are discussed.

The Impact of Diversification on Risk-taking in the Financial Holding Companies

This study investigates the relationship between diversification and risk-taking in the financial holding companies (FHCs). There are five risk-taking variables analyzed in the research, including ...

Financial reform and the adequacy of deposit insurance fund: Lessons from Taiwanese experience

Financial reforms and capital adequacy are probably the most critical issues for the banking industry in the world. This study examines the effectiveness of financial reforms carried out in Taiwan recently and measures the adequacy of the deposit insurance fund (DIF), including financial restructuring fund and Designated Reserve Ratio (DRR) strategy in Taiwan. We have improved on the methodology of Episcopoc (2004) and report estimates of the cost of deposit insurance and implied reserves for each bank or financial holding company. Estimates of the implicit cost of government guaranty of the DIF are also included. To stabilize its financial environment in 2000, the Taiwanese government amended many bank regulations, including the enactment of the Financial Holding Company Act (FHC Act) of 2001 and the Financial Restructuring Fund Statute. Our evidence shows lower volatilities and average unit cost of deposit insurance for seven sampled FHCs compared to sixteen sampled banks, even though the FHCs are larger. These results indicate the effectiveness of the financial reforms put forward by the Taiwanese government. When implied reserves are compared with the Designated Reserve Ratio (DRR) strategy of 2%, imposed by the Central Deposit Insurance Corporation (CDIC) in 2007, we find that the DIF would have been sufficient in 2006, but not in 2000. The results imply that the fixed target ratio for the DIF may not be appropriate. In addition, the details of financial reforms in Taiwan starting in 2001 are provided and demonstrate resolve in implementing financial reforms. Finally, financial reforms of Taiwan and the calculations of DRR and estimates of the implicit cost of government guaranty of the DIF can be used as lessons for other countries.

National Agricultural Cooperative Federation Issues and Solution of Financial Holding Companies

National Agricultural Cooperative Federation Issues and Solution of Financial Holding Companies

Measuring Managerial Efficiency of the Financial Holding Companies in Taiwan - Applying the Malmquist Index and Co-Plot Approach

Fourteen financial holding companies (FHCs) in Taiwan between 2004 and 2011 were applied as the research samples. The BCC model of Data Envelopment Analysis (DEA) was used to evaluate the scale efficiency (SE), and the Malmquist Index was further applied to the intertemporal efficiency analysis. The research result showed the leader was Shin Kong, followed by Fubon and Waterland whereas the followers were other FHCs including E.Sun, Taishin, and Jih Sun. In addition, through the two-dimensional graphic characteristics, the Co-Plot method was used to display the dynamic relationships among the FHCs and each variable.

A Strategic Group Analysis of Financial Holding Industry in Taiwan - Structural Relationship and Dynamic Development

This study aims to conduct analysis of the dynamic development of the strategic groups of fourteen Financial Holding Companies (FHCs) in Taiwan in terms of diversification, entry barriers and asset turnover by means of the MDPREF Model of MDS during the 2008-2010 period. The findings show that these FHCs are divided into Leader Group, Follower Group and Laggard Group. Time-axis vector was further applied to the longitudinal analysis of FHCs to have a clear understanding of their annual strategic choices. The study differs from the traditional cluster analysis that cannot show the results in two-dimensional graphics.

Financial Determinants of Bank Performance in Taiwan

As the consolidation of financial institutions is one of the highlights in recent financial territory, we examine whether banks being subordinated under the financial holding company (FHCs) outperform to independent banks in Taiwan, covering 15 FHCs banks and 18 independent banks in our sample for the period from 2005 to 2010. Using the CAMEL approach, we also investigate empirically further the financial determinants of banks’ performance regarding FHCs banks and independent banks respectively, and examine whether the financial determinants of banks’ performance differ before and after the financial crisis. Results show that ROA is strongly related to certain CAMEL ratios, such as the total capital ratio, loan loss reserve/gross loans, the burden ratio, and net interest income divided by total assets. Moreover, the positive significant capital adequacy ratio in the post-crisis period in our sample is mainly driven by subordinated banks. Finally, asset quality factor has explaining power for the pre-crisis and post-crisis periods, meaning prevention safety net built predominantly in refraining from external shocks.

Do Financial Reforms Improve the Performance of Financial Holding Companies? The Case of Taiwan

AbstractWe examine the performance of financial holding companies (FHCs) in Taiwan after the financial reform that removes the separation of banking, securities, insurance, and other financial services. Using data envelopment analysis, we find that FHCs fail to improve technical efficiencies in the post‐reform era. They also do not outperform independent commercial banks after the financial reform. Lower technical efficiency caused by excess operating expenses appears to be the primary source of inefficiency. While scale efficiency may improve as FHCs grow larger, the benefits are marginal and insufficient to offset the potential costs of organizational diseconomies. Our findings suggest that increasing the size and scope of financial activities alone do not necessarily improve the performance of financial firms.

Performance assessments of Taiwan’s financial holding companies

This paper uses Risk-Adjusted Return on Capital (RAROC) to assess the performance of 14 financial holding companies (FHCs) in Taiwan. RAROC value indicates a firm’s performance after considering the market risk effect, and gives a better measurement of the firm’s operational productivity than traditional methods. We use the full valuation methods to calculate Value at Risk (VaR) as the market risk measurement for economic capital. According to the New Basel Capital Accord, the market risk of Internal Model should be adjusted, and the Bank for International Settlement suggests using the backtest to select the best full valuation method for estimating adjusted VaR. Therefore, this paper evaluates the best market risk model, and assesses and compares the performance for each firm before and after its merger and acquisition into the FHC. Overall, we find weak evidence that the performance of 14 FHCs increased over time.

Financial Holding Company Structure for India

Indian banking sector is passing through another crucial phase in its evolution with the Reserve Bank of India proposing the formation of holding companies in banking groups. This paper offers an analytical discussion about the proposed financial holding company (FHC) or banking holding company (BHC) that is claimed to offer considerable advantages as the banks will be much better protected against possible adverse effects from the activities of their non-banking financial subsidiaries. The paper recommends that the financial holding company (FHC) model ought to be pursued as a preferred model for the financial sector in India. In addition, the FHC model can be extended to all large financial groups – irrespective of whether they contain a bank or not. Accordingly, there can be Banking FHCs controlling a bank and Non-banking FHCs, which do not contain a bank in the group.

A Study of the Merger Pattern for Taiwan Financial Holding Company

In the era of ’great amalgamation’, developed countries such as the United States and Japan aremoving toward the direction of M&A. In order to improve the competitiveness of the domestic bank,the government changes two times, also incline to encourage the bank to amalgamate, no matter helpthe leading factor of the competent authority or between two parties, or the financial institution isbecause of operating the doing in the test amount on.From 2001 to April in 2012, there are 62 financial holding companies M&A. This essay is anempirical study which generalizing the methods and the reason of mergers within the financial holdingindustries in our country, separately discussing the five aspects, including legal surface, financialsurface, economical surface, buying willingness, and paying methods.In the future, the mergers of financial industries will increase and their methods will continue tochange in a better way. When financial holding companies are processing mergers, the result of thisessay can be their reference as well.

Assessing Taiwan financial holding companies’ performance using window analysis and Malmquist productivity index

Performance evaluation is the important approach for enterprises to give incentive and restraint to their operators and it is also an important channel for enterprise stakeholders to get the performance information. The purpose of this study is to analyze current evaluation system for Taiwan Financial Holding Companies. This research tries to measure the performance on thirteen financial holding companies in Taiwan for the period 2003 to 2009. The result presented the proposed method is practical and useful. Also the study result represented that the combined method had certain scientific and rationality. The evaluation model indicates that this method be more reasonable and easier to grasp than other methods. As a result, it is easier to popularize this evaluation method in enterprises. The study thus presents a complete assessment model that helps managers to identify items for improvement, while simultaneously promoting cost and time efficiencies in financial Holding Companies. Key words: Financial holding companies, DEA (data envelopment analysis), window analysis, malmquist productivity indexes.