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The Impact of Non-Performing Loans on Bank's Operating Efficiency for Taiwan Banking Industry

Author

Listed:
  • Chiung-Ju Liang

    (Department of Business Administration, National Taiwan University of Science and Technology, Taiwan)

  • Ming-Li Yao

    (Department of Business Administration, National Taiwan University of Science and Technology, Taiwan)

  • Dar-Yeh Hwang

    (Department of Finance, National Taiwan University, Taipei, Taiwan)

  • Wei-Hsiung Wu

    (Department of Finance, National Taiwan University, Taipei, Taiwan)

Abstract

The DEA model is applied to analyze the operational efficiency of Taiwan's publicly-listed banks to reveal the influence of the rising non-performing loan ratio (NPLR) on Taiwan's banking industry. After taking into account the NPLR and the different classifications of banks, the respective performances of different types of banks exhibit the following variations and characteristics: the originally more-efficient new private banks significantly fell behind the old public banks in terms of efficiency scores after the NPLR was included. The old private banks' operational efficiency fell behind that of the other banks at all times. The productivity of all new private banks exceeded that of the other banks.

Suggested Citation

  • Chiung-Ju Liang & Ming-Li Yao & Dar-Yeh Hwang & Wei-Hsiung Wu, 2008. "The Impact of Non-Performing Loans on Bank's Operating Efficiency for Taiwan Banking Industry," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 287-304.
    • Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:02:n:s0219091508001350
    DOI: 10.1142/S0219091508001350
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    References listed on IDEAS

    as
    1. Fofack, Hippolyte L., 2005. "Nonperforming loans in Sub-Saharan Africa : causal analysis and macroeconomic implications," Policy Research Working Paper Series 3769, The World Bank.
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    More about this item

    Keywords

    Operational efficiency; super-efficiency; NPLR; DEA;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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