| Summary: | 碩士 === 德明財經科技大學 === 理財與稅務管理研究所 === 99 === In recent years, foreign banks have entered the Taiwan’s banking system through mergers and acquisitions. As a result, the market share of foreign banks in Taiwan 's banking industry has increased drastically. In view of this trend, the objective of this study is to analyze the effect of foreign bank participation on the cost efficiency of Taiwan's banking industry.
Based on the model developed by Lensink et al. (2008), this study uses the Battese and Coelli (1995) Stochastic Frontier Analysis (SFA). The samples include subsidiary banks of financial holding companies in Taiwan, independent banks which are not part of the financial holding companies and foreign bank branches in Taiwan. In addition, the sample period is divided into two time periods: (1) between 2002 and 2009, and (2) between 2007 and 2009.
The main findings of this study are as follows. First, as the level of participation by foreign banks increases, the cost inefficiency decreases significantly. Secondly, as the time increases, the level of participation by foreign banks increases which effectively enhances the banks' cost efficiency. Thirdly, among the factors of cost inefficiency, this study finds that the increases in the operating profit margin, the number of branches and the time are associated with a significant decline in the cost of inefficiency. Also, this study shows that as the non-performing loan (NPL) ratio increases, the cost of inefficiency increases significantly. Finally, the empirical model shows that domestic banks have relatively higher efficiency than foreign banks, thereby supporting the home field advantage hypothesis.
|
|---|
