The Risks Control And Supervision On Diversification In Finance Holding Company In Taiwan

Since 1990's, the innovation of finance technology, the change of consumers' demands and the tendency of unprecedented economic globalization have impelled the financial services to take strategic adjustments and institutions' reconstruction. Financial industry is experiencing the propounded structural transformation, and financial services have become more and more diversified. Financial holding company, which can be seen as the most useful means during the financial interim from divided operation system to a mixed one, has the advantages of economic scales and scopes as well as synergetic effect and lower cost. But its unique risks caused by diversified operation are inevitable. So, how to control and supervise the risks caused by diversifications in finance company has been a great issue that economists focus on.As far as now, there has been the embryos of the financial conglomerates in China, but the relative laws about mixed operation and financial holding company have not been passed. Without the legislation and proper regulation, this kind of companies and their consumers' rights are hard to be protected. So, now the introduction of the legislation and supervision on financial holding companies in developed districts and countries are very indispensable. Considering the resemblance in finance field between Taiwan and mainland, in this dissertation, the development of the regulation on Taiwan's finance holding companies is chosen to be the reference in this research. I utilize econometric methodology, and obtain monthly data from January 2003 to December 2005, for 14 financial holding companies that were found during 2001 and 2002 to find the how the operating risks and the risk-adjusted revenue respond to the diversified financial operations in finance holding company. My finding suggests that diversification in finance holding company could reduce the operating risk. So, on the basis of the conclusion, I focus on the supervision system on finance holding company in Taiwan, see how it works, and analyzes its advantage and disadvantage in the forth part of this paper. And I hope this paper could be a reference to the legislation and the choice of supervision system of finance holding company on mainland.This dissertation has two academic innovations1 In this paper, I choose the development of regulation on Taiwan's finance holding companies as the reference, quite different from the previous researches that usually introduced the practice and experience from Western countries (the USA,Britain,Germany) and Japan.2 In the forth part, I not only summarize the regulation rules, but also introduce the financial regulation system in Taiwan, and that could be seen as a small reference to the legislation of finance holding company on mainland.The biggest deficiency of the thesis is that, there is only 14 finance holding companies in Taiwan that have been legally existed for less than 5 years. So, it is hard to obtain enough data to get an ideal conclusion in econometric analysis.