Taiwanese Banking Industry Research Articles

Performance Evaluation of the Taiwanese Banking Industry before and after the COVID-19 Pandemic

Performance Evaluation of the Taiwanese Banking Industry before and after the COVID-19 Pandemic

Hybrid MADM-based study of key risk factors in house-for-pension reverse mortgage lending in Taiwan's banking industry

The issue of financial problems among the elderly has garnered the attention of multiple generations. In 2018, Taiwan formally attained an ageing society status. In order to address the financial difficulties elderly people face, an annuity system reform was launched by the Taiwanese government. Reverse mortgage lending, which is performed on the basis of house-for-pension, is an alternate method for enhancing their standard of living and sustaining their financial stability. The elderly applicants often mortgage their properties to financial institutions in order to maintain a steady cash flow for the fulfilment of their daily needs and live their remaining years in the mortgaged properties without vacating. Prior studies on house-for-pension in the Taiwanese context primarily concentrated on institutional implementation analysis but limitedly explored the uncertainty risks banks face when implementing the house-for-pension scheme. First, a literature review on the risks associated with house-for-pension reverse mortgage financing and comprehensive interviews with banking industry professionals were conducted. Subsequently, in the Taiwanese banking sector, assessment criteria for important risk factors in house-for-pension reverse mortgage financing were devised. The decision-making trial and evaluation laboratory (DEMATEL) was utilised to assess the interdependence of the assessment criteria. Next, the DEMATEL-based analytic network process (ANP) or DANP were used to calculate the weights of evaluation criteria. By employing modified VlseKriterijumska Optimizacija I Kompromisno Resenje (VIKOR), a gap analysis was undertaken on the assessment criteria and sub-criteria. The study's findings serve as a guideline for the Taiwanese banking industry in formulating, improving, or amending the risk exposure mitigation measures for reverse mortgage lending.

Driving lateral collaboration effectiveness across multinational enterprises: The antecedents and consequences

AbstractIn the face of increasing global uncertainty, multinational enterprises (MNEs) have turned to downsizing to maintain profitability while emphasizing lateral collaboration to increase productivity. Here, we establish a conceptual framework and examine from a macro‐to‐micro perspective how the growing subjects of subsidiary role change, team alignment and employee engagement impact lateral collaboration. We used structural equation modelling to analyse the results of 252 surveys given to MNE subsidiaries in the Taiwanese banking industry and found that employee engagement was central to driving lateral collaboration effectiveness, indicating that the subsidiary role is critical for boundary‐spanning activities and building bridges between various teams. These activities in turn enhance subsidiary performance and lead to better people development. Our findings demonstrate that bundling employee engagement with human resource practices is a strategic way of positioning for the evolution of subsidiary management.

Does Corporate Governance Enhance Bank Efficiency in Taiwan

The purpose of this study is to investigate the relationship between bank efficiency and corporate governance in Taiwan. It aims to explain the effects of ownership structure, institutional investors' structure and manager turnover. The empirical results provide weak evidence to support the proposition that independent directors can improve bank efficiency. This study broke down the structure of institutional investors and found that when a higher percentage of banks were owned by domestic corporations, the efficiency-augmentation hypothesis was supported, whereas when a higher percentage of banks were owned by domestic trust funds, the efficiency-abatement hypothesis was supported. This study also found that in the Taiwanese banking industry in general, top executives of poorly performing banks are not more likely to lose their jobs and that, sometimes, boards did not appoint top executives based on ability but rather tended to appoint them based on the personal preferences of family board members.

Measuring the Degree of Internationalization for Taiwanese Banking Industry: Scoring Measurement by Principal Component Analysis

This paper mainly focuses on researching and measuring the effects concerning the degree of internationalization (DOI) within the Taiwanese banking industry, with particular application of the scoring measurement by principal component analysis (PCA). The empirical results indicate that there exits an increasing trend for the DOI of Taiwanese banking industry as measured by FATA (each bank’s overseas assets over its own total assets), FETE (each bank’s overseas equities over its own total equities), FSTS (each bank’s overseas sales over its own total sales) and FBTB (each bank’s overseas facilities and operating units over its own total operating units). Under the Box-cox transformation, the DOI scoring index as percentage level (%) from 0 to 100 shows that the relevance of the variables are mostly above 50, indicating that the DOI of the observed Taiwanese banks are quite strong. Thus, the results support the existence and importance of the DOI for current Taiwanese financial institutions, while presenting complimentary and more realistic information regarding the degree of internationalization for Taiwanese banks. At the same time, providing substantial groundwork and adding value to future international management research and investigations that could help representatives of government and management decision makers to achieve better investment decision-making for business strategies and prompt international expansion.

How Do Groups Matter?

The purpose of this study is to examine the relationship between competitive responses and performance, subject to environmental dynamism and strategic action types, to understand competitive responses under moderating effects. This study employed a structured content analysis of coding data from multiple sources and collected competitive actions and responses for the period between 1999 and 2011 in the Taiwanese banking industry. The results show that response likelihood, response imitation and response speed are positively associated with firm performance and that environmental dynamism weakens the relationships among firm performance, response likelihood and response speed. Furthermore, the intensity of strategic action strengthens the relationship between response imitation and firm performance. This study first investigates the roles of environmental dynamism and action types on the relationship between competitive response characteristics and firm performance. This study considers not only the impact of individual firms' responses on their performance but also the impact of collective actions taken by other firms, thus providing new insights in competitive dynamics research.

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.

Incorporating risk input into the analysis of bank productivity: Application to the Taiwanese banking industry

This study reappraises banks’ productivity by using 42 Taiwanese banks during 1999–2007 as observations. It introduces an input-oriented generalized metafrontier Malmquist productivity index (I-gMMPI), while considering the latent effect of risk-taking behavior in the analytic framework. We learn that public and private banks should face separate short-term technological frontiers, while the econometric model considering risk input can portray banks’ operating frontiers better. Moreover, neglecting the influence of risk input would bring about distortions of efficiency, technology and TFP dynamic estimations for banks; meanwhile, the degree of scale economies would also be overestimated. The paper concludes that neglecting the risk-taking essence in bank performance evaluation is equal to allowing banks to barter risk-bearing as the term for further output growth. Consequently, the potential cost is that banks may excessively aggrandize their scales of business, implying the possibility of another financial crisis.

Service Quality, Relationship Quality, and Customer Loyalty in Taiwanese Internet Banks

While deregulation of financial institutions has increased competition in the Taiwanese banking industry, the advent of e-commerce has provided business opportunities for consumer financing operations. Network banking helps banks to develop relationship marketing by delegating tasks to customers, thus improving customer loyalty. The relationships between service quality, relationship quality, and customer loyalty were investigated in this study. It was found that crisis handling and relationships are negatively, and relationship quality and customer loyalty, and service quality and customer loyalty positively, correlated. Customer loyalty in Taiwanese Internet banks can be increased by improving service quality and relationship quality.

Capital structure and cost efficiency in the Taiwanese banking industry

By utilizing a sample of 44 Taiwanese banks, this study analyses whether banks can mitigate agency costs, to increase firm performance through optimization of capital structure. The stochastic frontier approach is adopted to determine cost efficiency as the firm performance indicator, an approach that is capable of controlling outside environmental factors. Furthermore, this study uses two-stage least squares to estimate two simultaneous equations that are then used to examine the relationship between capital structure and firm performance. This study includes indicators of ownership structure. The main results are: first, optimal capital structure is selected by the manager to combat the agency problem and thus improve performance, yielding results consistent with agency theory; and second, reducing managerial share ownership will decrease agency cost and increase firm performance, a finding that is consistent with the Entrenchment Hypothesis.

Gauging bank efficiency during card insolvency crisis: the case of the Taiwanese banks

Previous studies mostly focus on bank performance, but few studies have effectively investigated how efficiency is reduced as banks expand credit card or cash card issuances. This study seeks to investigate how bank's relaxations of card issuance and credit revolvers reduce bank efficiency during card insolvency crisis in the Taiwanese banking industry. The results show that the credit card insolvency crisis reduces bank efficiency. Particularly, banks with low card issuance levels perform better than those with high card issuance levels. This suggests that if banks approve card applications while neglecting an applicant's capability to repay the card debt, they will suffer losses. Furthermore, the regression used in this study indicates that bank efficiency is negatively related to the issuances of credit cards, issuances of cash cards, and the revolving amount of credit cards. These findings imply that the relaxations relating to the card issuance or loosened approvals of credit revolvers reduced bank profits resulting from unpaid debts.

Bank loan loss provision decisions: Empirical analysis of Taiwanese banks

By adopting the stochastic frontier model, this study follows Anandarajan, Hasan, and Lozano-Vivas (2005) and examines the efficiency frontier of the Loan Loss Provision (LLP) model in the Taiwanese banking industry during the period 1997–2004. The determinants of the inefficiency LLP are also analyzed. The main results are as follows. (i) The overall efficiency LLP index was 0.3282, indicating 67.18 per cent inefficiency of LLP decision making, similar to one major finding of the study by Anandarajan et al (2005), which suggests that inefficiency does exist for the LLP decision making. (ii) The LLP estimator is significantly and positively correlated with default loan loss. (iii) Large firms are generally subject to an especially close scrutiny by financial analysts and are thus highly motivated to maintain their credibility. In addition, they are more financially transparent relative to small firms and are more efficient in LLP decision making. (iv) Banks with higher non-interest expenses are inclined to manage LLP inefficiently.

Determinants of information technology investments: The case of ATM in an emerging economy

Abstract This paper examines the determinants of automatic teller machine (ATM), a kind of information technology (IT), in the Taiwanese banking industry. The lessons learned from Taiwan's banking industry can be applied to China's banking industry to facilitate the understanding of the IT adoption strategies of Chinese financial institutions. Factors that are expected to have impact on IT investment in general and on ATM investment in particular are identified from three perspectives, namely operating scale perspective, deposit service perspective, and operating cost perspective. The results of this study indicate that operating scale, banking deposit service and operating cost are all significant determinants of ATM investment in the Taiwan banking industry. The results are useful for those banks and financial institutions outside of China in deciding their ATM investment strategies in China when trying to enter and penetrate the Chinese banking market.

Uncertainty and total factor productivity in the Taiwanese banking industry

In this article, we formulate a behavioural model under uncertainty to estimate Total Factor Productivity (TFP) in the Taiwan banking industry. In particular, the article provides a model based on the safety-first rule under uncertainty to measure the risk premium in banking operations that are subject to loan default and other investment risks. With panel data of 40 banks in 1981–1996, a translog cost function and the associated share equations are used to estimate the dual rate of Total Cost Diminution (TCD), the dual Returns To Scale (RTS) and the derived primal rate of TFP. A constant elasticity of transformation output function is employed to construct an aggregated output index of loan and investment activities. The empirical results indicate zero productivity growth and a highly risk-averse banking industry. Government-owned banks are generally more risk-averse than privately owned banks. As expected, the Taiwan banking industry became more risk-venturesome after the deregulation and liberalization...

Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry

The objective of this paper is to examine the nature of the Taiwanese banking sector and to analyze the impact of financial liberalization on the Taiwanese banking industry. We present empirical evidence to show that the recent wave of bank mergers observed in other countries is also suitable for Taiwan. Based on empirical results for overall economies of scale and expansion path subadditivity, Taiwanese banks should obtain the benefit of scale economies by merging with other banks rather than expanding by opening more branches. Furthermore, we show that the Relative Market Power hypothesis—which postulates that greater market shares lead to higher profitability—finds empirical support in Taiwanese banking data after financial reforms were enacted.