The Performance Of Financial Holding Companies In Taiwan

There are overfull banks, insurance companies and stock exchanges in Taiwan with a small average scale and a low market concentration, which also take on a swart competition with each other. Aiming at this phenomenon, the government wants to set up financial holding companies in order to integrate the companies' resources. In virtue of the management spanning the industries, the government will enlarge the management scale and scope of financial structures; improve the financial market concentration, so as to improve the comprehensive performance of financial structures. After the promulgation of "financial holding company law", fourteen financial holding companies have been set up in Taiwan. How about the effect of these companies and whether have them achieved the original intension of policy constitutors? We need to analyze from the theoretical and evidential perspectives.As bank is the most important financial structure, if financial holding companies can exert the above functions, they will have positive effect on the whole performance in Taiwan banking industries. Under such circumstances, a bank will have differences in performance whether it belongs to financial holding companies or not. Whereas, we will have tests and appraisals on the performance of Taiwan's banking industries by way of DEA. We will test further the effects on banks' performance whether joining the financial holding companies or not. Thereby, we can make tests and appraisals on the financial holding companies' improving performances on financial structures in the perspective of banking industry. Making use of the technology efficiency appraisal way, we have made evidential analyses on the banks' management performances between 2003 and 2005 in Taiwan . Based on the 2003-2005 survey data of Taiwan's banking industry, this research uses DEA to assess technical efficiency of Taiwan's banks. Also the Tobit censored regression was applied to examine the relationship between technical and firm-specific characteristics. The empirical results show that most banks perform technical inefficiency.The major results were concluded as follows: In terms of the scale of the property, the result showed that "better efficiency in smaller scale". Banks with small property were constrained by its scale and thus were hindered in their future development. The average efficiency of banks under a financial holding company was worse than that of independent bank, but no statistical significance.Based on the analyses on the integral and specific performance of fourteen financial holding companies, we have set up an analytic framework using the two principle axis of "management performance" and "management strategy". We observe the performance and strategy of each financial holding company separately and analyze the management performance of financial holding companies in different strategic groups comparatively. We have found that the most unsatisfactory projects include deficient capital marketing occupancy ratio and general high operating costs in respect of management performance of financial holding companies in Taiwan. Thereby, in spite of encouraging the continual integration of financial structures positively, we should require each financial holding company and its subsidiary to strengthen the control of operating costs. Besides, if we observe the main body of study object, we can find that the competition strategy of financial holding companies represented by banks and insurance is more positive, and their performances are most above the average.