A Study on the Coping Strategy of Financial Supervisory Organization under Information Asymmetry: Case Study of Taiwan's Credit Card Market

Abstract

Information asymmetry has been a commonly existed phenomenon in banking system. This paper adopted consumer finance data from both government-owned and private-owned banks in Taiwan, variables such as numbers of effective cards, percentages of overdue loans, and revolving interest rate are used to investigate if information asymmetry phenomenon existed in Taiwan's credit card market. During the research period, Taiwan had suffered from severe crisis of credit card debt, financial supervisory organization interfered into the credit card market passively, hoping to improve the information asymmetry phenomenon of the credit card market. However, the research results show that not only information asymmetry phenomenon has not disappeared from Taiwan's credit card market, but worsen the adverse selection phenomenon and promoted moral hazard in certain degree.