The Effect of Diversifications on the Performance and Risks of Banks and Credit Unions in Taiwan

• Main Authors: Chi-An Wang, 王啟安
• Other Authors: 趙莊敏
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/q5fn4z

碩士 === 國立臺北科技大學 === 商業自動化與管理研究所 === 97 === Due to the competitiveness become more serious than ever in financial industry, financial organizations are doing more and more diversification to earn more operating income. But different studies and researches usually came out vary results. This study examines the banks and credit unions, two important types of financial organizations in Taiwan’s economy, doing diversification would give what kind of impact to their financial performance and risk. We choose 36 banks and 27 credit unions in Taiwan and collect 4-year period data from 2005 to 2008. There are two different diversification variables- Herfindahl-Hirschman index and Non-interest income to operating income ratio. Then we use Panel Threshold Regression Model to test if there are thresholds when financial organizations do diversifications. With the performance and risk, we combine them together and come out with one indicator- risk-adjusted rate of ROE. We find when banks and credit unions do more diversification it would influence their Risk-adjusted rate of ROE significantly. So making decisions of doing diversifications becomes a very important idea for management of banks and credit unions. The findings can help researchers to understand that different types of financial institutions may optimally choose different degrees of diversification, which sheds some light on the inconsistent findings in the literature regarding the relationship between diversification and firm values.