This study adopts a GARCH model to estimate the operational risk of Taiwan's banking industry by the Top-Down method. Based on the approach of Battese and Coelli (1995) we estimate the Trans-log cost model and the inefficient model simultaneously by the Maximum likelihood method. Our empirical result shows that the operational risks have a significantly positive impact on cost inefficiency -that is, regardless of which methods we use for calculation, operational risk drives down economic efficiency. Comparing with the basic index method, the multi-factor model of the Top-Down method is better at analyzing the relationship of operational risk and efficiency.Contribution/ Originality: This study contributes in the existing literature by employing a multi-factor model of Top-Down method to quantify banking operational risk. Furthermore, this is one of the very few studies which examine the relationship between operational risk and "real" bank's performance -cost efficiency.
In order to explore the potential influence of new mobile payment services on the Ephesus model developed by Kao and Hwang (2008), we investigated the relative performance of 19 Taiwanese banks from 2018 to 2021. The network efficiency was divided into two parts: management efficiency and profitability efficiency. Only one bank achieved total efficiency from 2019 to 2021. The stage efficiencies showed increments during the first three years (2018–2020), but they declined in 2021. Most banks had low efficiency in the management stage and high efficiency in the profitability stage, suggesting that there are weaknesses in the management of physical resources but high awareness that mobile payment services can be exploited to achieve high profitability. Our results prove that mobile payment is a potential and profitable new service that Taiwanese banks should take advantage of. Comparing the results between the CCR model and the NDEA model, we observed that the NDEA model has more explanatory power, as it provides insight into the internal structure of the working process of Taiwanese banks.
This study aims to investigate the relationship between a bank's survival and its cost efficiency by examining47 commercial banks in Taiwan between the years 2000 and 2008. Based on the CAMELS model, wefirst use logistic regression to extract the key factors which might affect bank survival. Then, according to Battese and Coelli (1995), we simultaneously estimate the stochastic cost frontier function and the inefficiency functionto evaluate the bank's cost efficiency. Our main empirical findings are as follows: (1) Four key factors that cause bank survival or failure are debt ratio, non-performing loans (NPLs) ratio, growth rate of assets and bank's ownership. (2) The higher the debt ratio and the NPL ratio, the worse is the efficiency of banks. (3) The cost efficiency of state owned banks are better than that of private banks. (4) The averagecost efficiency of failed banks is worse than that of survived banks.
Ownership structure and the performance of banking industry have been long considered as a matter of debate. Despite of differences in perspective, both “development view” and “politics view” approve the desire of governments to control financial institutions through their ownership structure. This paper adopts the two-stage stochastic frontier analysis (SFA) to examine the relation between ownership structure and bank’s efficiency in two long historic communism countries – China and Vietnam with the consideration of some political factors. Our result consistently indicates that banks with foreign-controlled shareholders in both countries can increase their efficiency significantly. Additionally, we uncover an interesting phenomenon that is during the election years, state-owned banks in China and Vietnam outperform the others. These banks are also the most beneficiaries from the economic expansion. Finally, meta-frontier is utilized to compare the relative performance of banking industry in these two countries.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.