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Gauging bank efficiency during card insolvency crisis:the case of the Taiwanese banks

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  • Bi-Huei Tsai

    (National Chiao Tung University, Taiwan)

Abstract

Previous studies mostly focus on bank performance, but few studies have effectively investigated how efficiency is reduced as banks expand credit card or cash card issuances. This study seeks to investigate how bank's relaxations of card issuance and credit revolvers reduce bank efficiency during card insolvency crisis in the Taiwanese banking industry. The results show that the credit card insolvency crisis reduces bank efficiency. Particularly, banks with low card issuance levels perform better than those with high card issuance levels. This suggests that if banks approve card applications while neglecting an applicant's capability to repay the card debt, they will suffer losses. Furthermore, the regression used in this study indicates that bank efficiency is negatively related to the issuances of credit cards, issuances of cash cards, and the revolving amount of credit cards. These findings imply that the relaxations relating to the card issuance or loosened approvals of credit revolvers reduced bank profits resulting from unpaid debts.

Suggested Citation

  • Bi-Huei Tsai, 2010. "Gauging bank efficiency during card insolvency crisis:the case of the Taiwanese banks," Journal of Developing Areas, Tennessee State University, College of Business, vol. 44(1), pages 267-285, September.
    • Handle: RePEc:jda:journl:vol.44:year:2011:issue1:pp:267-285
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    More about this item

    Keywords

    Cost Function; Efficiency; Credit Card; Revolving Credit; Card Insolvency Crisis; Bank;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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