An Analysis of performance in Taiwan''s Banking Industry Using a Stochastic Frontier Cost Function--Fourier Flexible Functional Form

• Main Authors: Huey-Jiun Ju, 朱惠君
• Other Authors: Bih-Shiow Chen
• Format: Others
• Language: zh-TW
• Published: 1998
• Online Access: http://ndltd.ncl.edu.tw/handle/77243849410959674921

碩士 === 東吳大學 === 經濟學研究所 === 86 === Due to rapid change in financial industry structure, diversity of financial goods demanded, and frequently mutually impact economy situations around the world, all those things make future financial market sharply compete. Hence it is currently important work to promote the competitive viability and operating efficiency of banking industry in Taiwan. Thus this study will deeply investigate the competition in banking industry. We try to use a Fourier Flexible functional form to estimate cost function for each banks, and compare with Translog cost function to examine the differences of estimating results between these two cost functions. Furthermore, we measure the relative inefficiency among banks, and estimate ray scale economies, scope economies, expansion path scale economies and expansion path subadditivity to examine the competitive viability in banking. There are 40 domestic banks, including 11 public banks and 29 private banks, and the sample period from 1981 to 1996 years. We use LIMDEP econometric software to estimate Panel Data fixed-effect model. The empirical results indicate different cost specifications will influent the estimates for inefficiencies, scope economies, expansion path scale economies and expansion path subadditivity. But the inefficiency ranking by average asset size and scale economies estimates will not affected. In addition, private banks(especially new banks) still perform more efficient than public banks. And most banks have increasing returns to scale, that is when increasing output will decrease the long run average cost. However, the majority banks have insignificant scope economies, even joint producing loans and investment will not decrease operating cost. Finally, when expanding output, it will exist more cost advantages by two or more little banks to produce some specialized products than by a large bank singly producing.