Title: Market power and merger activity in Taiwan banking

Authors: Tsai-Lien Yeh

Addresses: Ming Chuan University, 2F, No. 9, Lane 17, Yung-Kang Street., Taipei, Taiwan, ROC

Abstract: This paper analyses the market power of the Taiwan banking industry, by employing a dynamic economic error-correcting model. The main result is that banks are competitive and the degree of competition is stronger in the short run compared to the long run. Our empirical studies also show that the Taiwan banking industry increased market power after undertaking merger activities. Mergers can increase the size of banks, and large banks are more competitive. We also find that the dynamic Error Correction Model (ECM) analysis offers an appropriate method by which to study market power issues, while the static model, from the statistical perspective, seems inappropriate.

Keywords: bank markets; market power; mergers and acquisitions; ECM; error correction models; Taiwan; banking industry

DOI: 10.1504/IJFSM.2009.026634

International Journal of Financial Services Management, 2009 Vol.4 No.1, pp.21 - 37

Published online: 21 Jun 2009 *

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