Title: Efficiency and productivity growth in Taiwanese banking

Authors: Tsai-lien Yeh

Addresses: Department of International Business, Ming-Chuan University, 2F, No. 9, Lane 17, Yung-Kang St., Taipei, Taiwan, ROC

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.

Keywords: banking efficiency; mergers; off-balance-sheet activities; bank productivity; Taiwan; banking industry; data envelopment analysis; DEA; Taiwanese banks.

DOI: 10.1504/IJFSM.2008.022552

International Journal of Financial Services Management, 2008 Vol.3 No.3/4, pp.269 - 282

Published online: 14 Jan 2009 *

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