Two Essays on Performance Management of Bank Lending Activities

• Main Authors: Mei Kuo Chung, 梅國忠
• Other Authors: Lin Wei Shong
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/24788003230969248209

博士 === 國立臺灣科技大學 === 企業管理系 === 92 === The essays in this dissertation construct performance measures of banking lending activities and investigate how the characteristics of performance management affect the bank’s non-performing loan (NPL) ratio in Taiwan. The first essay compares two mainstream studies about bank performance measures: non-monetary measures and monetary measures. We study the characteristics and deficiencies of these measures as they relate to the quality assurance of bank lending activity. To assure the quality of lending, our research utilizes the value-added approach to analyze the lending production process and find sources for adding value to lending activities. The lending process has been divided into eight activities. The correspondent output for each activity has been identified. Based on these findings, we establish the value-added internal measures for bank lending. The characteristics of the internal measures are mainly outcome-based and quality-oriented. To solve problems of overdue loans and bad debts, our research further analyzes two critical internal measures: The borrower’s condition and the borrower’s capacity, and extends these internal measures to several sub-measures. The purpose of this research is to reduce the bank''s operational risk during the lending process which is in line with the purpose of Basel II. The second essay investigates the characteristics of performance management in regard to lending activities and lending-related employment in 29 Taiwan commercial banks. The purpose of this essay is to determine the factors that influence the level of the bank NPL ratios in Taiwan banking industry. The performance measures have been divided into three categories: Internal outcome-based measures, final outcome-based measures and behavior-based measures. Our empirical results reveal, first of all, that in order to reduce the bank NPL ratios, it is vital to increase the percentage of internal outcome-based performance measures on total lending performance. This applies when banks carry out performance evaluations on lending-related employees in addition to their emphasis on final outcome-based performance measures. The purpose here is to enable lending-related employees to enhance the information collection and review of borrowing enterprises. Secondly, results reveal that if banks ask lending-related employees to strengthen each analysis of Capacity and Condition of borrowing enterprises, and the lending-related employees can grasp the essence of Capacity and Condition during their analyses, they will be able to accurately monitor the organizational management capabilities and loan repaying sources of the borrowing enterprises. This will then facilitate the reduction of NPL ratios. Finally, based on its findings, this study aims to provide several policy-making suggestions for banks to reduce the NPL ratios from the perspective of performance management.