| Summary: | 碩士 === 淡江大學 === 會計學系 === 89 === When banking in Taiwan positively predispose management to diversification, it wonders whether diversification is of benefit to reduce risk and increase returns. To decrease risk, Tzung, Lee-Hsin conceives of the diversification as effective, according to the survey in the past; but, to increase returns, it is of no effect as indicated by the result of Cheng-Ho, Peng’s study. Based on both of the theories of “Resource-Based Theory” and “ Portfolio Theory”, diversification is advantageous to lessen risk and increase returns, an effect that has not been absolutely attained for a short period of time but long-term. Accordingly, analyzed discretely in perspective of financial performance and investors, this study focus on the behavioral patterns of the standard banks, on Taiwan Stock Exchange and Over the Counter Markets, and investigates whatever influence the diversification can have on risk, returns and risk-adjusted returns. Primarily, the study examines if there is any consistency in the annual diversification, influencing every returns and risk. In the light of the status of consistency, this study, by either Cross-Sectional Analysis or Time-Series and Cross-Sectional Regression, scrutinizes the diversified degree for influence on risk, returns and risk-adjusted returns. The consequence of this study indicates that:
1.- The influence of diversification upon both risk and returns don’t consist with each other annually but remarkably on system risk-adjusted returns (ROA and ROE).
2.-The diversification in 1995 and 1996 has few influence on risk, returns and risk-adjusted returns. After 1997, the diversified degree has distinguishably positive relation to increase both returns and risk-adjusted returns but negative to lessen risk. It means that comparatively, the banks in the higher diversified degree gain ascendancy over the others on better performance and less risk. This process avers that the effect of diversification just can be carried out in the long-term period of time instead of the short one.
3.- It is distinguishing that diversification is positively related to both system risk-adjusted ROA and ROE. In other words, compared with the others affected by an industrial recession, the banks in the higher diversified degree don’t vary much in the returns of covariance.
It draws a conclusion from this study that banking diversification is a correct decision with effect, not only dispelling risk but also making better performance. The inventors intending to make an investment in banking, it will be a proper choice to target the banks, which are in the higher diversified degree.
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