Efficiency and productivity growth in Taiwanese banking
by Tsai-lien Yeh
International Journal of Financial Services Management (IJFSM), Vol. 3, No. 3/4, 2008

Abstract: Do mergers promote efficiency in the banking industry? A Data Envelopment Analysis in this study revealed that technical efficiency and productivity in Taiwanese banks increased more during the ex-post period (2003–2004) of the Merger Act than during the ex-ante periods (1999–2000). The empirical results of this study indicate that banks surviving mergers exhibited increased technical efficiency due to economies of scale, as proposed in earlier studies by Berger and Mester (1997). Further, productivity analysis documented a positive association between size of banks and productivity growth. Mergers can increase the size of banks, and large banks are better able to develop fee-based off-balance-sheet activities which can yield superior returns. Banks aggressively engaged in these outputs, they have higher productivity outputs.

Online publication date: Wed, 14-Jan-2009

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