Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry

Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry The objective of this paper is to examine the nature of the Taiwanese banking sector and to analyze the impact of financial liberalization on the Taiwanese banking industry. We present empirical evidence to show that the recent wave of bank mergers observed in other countries is also suitable for Taiwan. Based on empirical results for overall economies of scale and expansion path subadditivity, Taiwanese banks should obtain the benefit of scale economies by merging with other banks rather than expanding by opening more branches. Furthermore, we show that the Relative Market Power hypothesis—which postulates that greater market shares lead to higher profitability—finds empirical support in Taiwanese banking data after financial reforms were enacted. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2003 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1024024501271
Publisher site
See Article on Publisher Site

Abstract

The objective of this paper is to examine the nature of the Taiwanese banking sector and to analyze the impact of financial liberalization on the Taiwanese banking industry. We present empirical evidence to show that the recent wave of bank mergers observed in other countries is also suitable for Taiwan. Based on empirical results for overall economies of scale and expansion path subadditivity, Taiwanese banks should obtain the benefit of scale economies by merging with other banks rather than expanding by opening more branches. Furthermore, we show that the Relative Market Power hypothesis—which postulates that greater market shares lead to higher profitability—finds empirical support in Taiwanese banking data after financial reforms were enacted.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 17, 2004

References

  • Efficiency in European Banking
    Altunbas, Y.; Gardener, E. P. M.; Molyneux, P.; Moore, B.

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