An Analysis of Scope Economy of Financial Holding Companies in Taiwan

• Main Authors: Ling-Yu Chiang, 江羚毓
• Other Authors: Mei-Ying Huang
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/30947933539682077060

碩士 === 國立臺北大學 === 經濟學系 === 93 === This paper analyzes cost function of financial holding companies and their four different kinds of subsidiaries bank, security, property-liability insurance, and life insurance data used in this analysis covers 1996 to 2003. We use “stochastic cost frontier model” to calculate cost efficiencies of these four industries after their merged with financial holding companies. We use parameters of cost function to estimate the cost of four subsidiaries and the total cost of financial holding companies. The scope economy index is defined for determining the financial holding companies whether hold scope economy. The empirical results find that the cost of bank is positively related to the productivity of security and life insurance. The productivity of security is statistically significant at 1%, but the productivity of property-liability insurance is negatively related to the cost of bank but statistically insignificant. In the cost whereas of security, the productivity of bank and life insurance is negatively related to the cost, property-liability insurance is positively related to the cost. However, these three effects are statistically insignificant. In the cost of property-liability insurance, the productivity of bank and life insurance is positively related to the cost but the two effects are statistically insignificant. The productivity of security is negatively related to the cost and statistically significant at 5%. In the cost of life insurance, the productivity of bank and security is positively related to the cost but property-liability insurance is negatively related to the cost, however, these three effects are statistically insignificant. Finally, in the economies of scope, the empirical results find only Mega, First and Hua Nan Financial Holding Companies presenting economies of scope in 2003. The common character of these three financial holding companies is that these companies are all composed of bank, security and property-liability insurance. It implies that the financial holding companies wish integrated synergy need not to be manifold type ones. A financial holding company composes of bank, security and property-liability insurance can get integrated synergy and economies of scope afterward. However, more empirical data will be needed to insure such implication.