IDEAS home Printed from https://ideas.repec.org/a/rnd/arjebs/v4y2012i12p691-702.html
   My bibliography  Save this article

Financial Determinants of Bank Performance in Taiwan

Author

Listed:
  • Yu-Ting Huang
  • Jean Yu

Abstract

As the consolidation of financial institutions is one of the highlights in recent financial territory, we examine whether banks being subordinated under the financial holding company (FHCs) outperform to independent banks in Taiwan, covering 15 FHCs banks and 18 independent banks in our sample for the period from 2005 to 2010. Using the CAMEL approach, we also investigate empirically further the financial determinants of banks’ performance regarding FHCs banks and independent banks respectively, and examine whether the financial determinants of banks’ performance differ before and after the financial crisis. Results show that ROA is strongly related to certain CAMEL ratios, such as the total capital ratio, loan loss reserve/gross loans, the burden ratio, and net interest income divided by total assets. Moreover, the positive significant capital adequacy ratio in the post-crisis period in our sample is mainly driven by subordinated banks. Finally, asset quality factor has explaining power for the pre-crisis and post-crisis periods, meaning prevention safety net built predominantly in refraining from external shocks.

Suggested Citation

  • Yu-Ting Huang & Jean Yu, 2012. "Financial Determinants of Bank Performance in Taiwan," Journal of Economics and Behavioral Studies, AMH International, vol. 4(12), pages 691-702.
    • Handle: RePEc:rnd:arjebs:v:4:y:2012:i:12:p:691-702
    DOI: 10.22610/jebs.v4i12.369
    as

    Download full text from publisher

    File URL: https://ojs.amhinternational.com/index.php/jebs/article/view/369/369
    Download Restriction: no
    File URL: https://ojs.amhinternational.com/index.php/jebs/article/view/369
    Download Restriction: no
    File URL: https://libkey.io/10.22610/jebs.v4i12.369?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. S. Mishkin, Frederic, 1999. "Financial consolidation: Dangers and opportunities," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 675-691, February.
    2. DeYoung, Robert & Roland, Karin P., 2001. "Product Mix and Earnings Volatility at Commercial Banks: Evidence from a Degree of Total Leverage Model," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 54-84, January.
    3. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    4. Liu, Wan-Chun & Hsu, Chen-Min, 2006. "The role of financial development in economic growth: The experiences of Taiwan, Korea, and Japan," Journal of Asian Economics, Elsevier, vol. 17(4), pages 667-690, October.
    5. Lo, Shih-Fang & Lu, Wen-Min, 2009. "An integrated performance evaluation of financial holding companies in Taiwan," European Journal of Operational Research, Elsevier, vol. 198(1), pages 341-350, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bakam Fotso & E. I Edoun, 2017. "Critical Assessment of Banking Institutions in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 9(2), pages 6-21.
    2. Rossazana Ab-Rahim & Norlina Kadri & Amy-Chin Ee-Ling & Abdul Alim Dee, 2018. "CAMEL Analysis on Performance of ASEAN Public Listed Banks," International Business Research, Canadian Center of Science and Education, vol. 11(4), pages 96-105, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lapteacru, Ion, 2017. "Market power and risk of Central and Eastern European banks: Does more powerful mean safer?," Economic Modelling, Elsevier, vol. 63(C), pages 46-59.
    2. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2010. "The effects of focus versus diversification on bank performance: Evidence from Chinese banks," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1417-1435, July.
    3. Marcello Messori, 2009. "Consolidation, Ownership Structure and Efficiency in the Italian Banking System," Springer Books, in: Damiano Bruno Silipo (ed.), The Banks and the Italian Economy, chapter 0, pages 211-243, Springer.
    4. Sungho Choi & Bill B. Francis & Iftekhar Hasan, 2010. "Cross-Border Bank M&As and Risk: Evidence from the Bond Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 615-645, June.
    5. Meng-Chun Kao & Chien-Ting Lin & Lei Xu, 2012. "Do Financial Reforms Improve the Performance of Financial Holding Companies? The Case of T aiwan," International Review of Finance, International Review of Finance Ltd., vol. 12(4), pages 491-509, December.
    6. Mr. Gianni De Nicolo & Ms. Mary G Zephirin & Philip F. Bartholomew & Ms. Jahanara Zaman, 2003. "Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk," IMF Working Papers 2003/158, International Monetary Fund.
    7. Sungho Choi & Bill B. Francis & Iftekhar Hasan, 2010. "Cross‐Border Bank M&As and Risk: Evidence from the Bond Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 615-645, June.
    8. Gianni De Nicoló & Philip Bartholomew & Jahanara Zaman & Mary Zephirin, 2004. "Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 13(4), pages 173-217, October.
    9. Robert DeYoung & William Hunter & Gregory Udell, 2004. "The Past, Present, and Probable Future for Community Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 85-133, April.
    10. Barbara Casu & Panagiotis Dontis†Charitos & Sotiris Staikouras & Jonathan Williams, 2016. "Diversification, Size and Risk: the Case of Bank Acquisitions of Nonbank Financial Firms," European Financial Management, European Financial Management Association, vol. 22(2), pages 235-275, March.
    11. Dicembrino, Claudio & Scandizzo, Pasquale Lucio, 2011. "Can portfolio diversification increase systemic risk? evidence from the U.S and European mutual funds market," MPRA Paper 33715, University Library of Munich, Germany.
    12. Stiroh, Kevin J. & Rumble, Adrienne, 2006. "The dark side of diversification: The case of US financial holding companies," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2131-2161, August.
    13. Abuzayed, Bana & Al-Fayoumi, Nedal & Molyneux, Phil, 2018. "Diversification and bank stability in the GCC," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 17-43.
    14. Sarah Sanya & Simon Wolfe, 2011. "Can Banks in Emerging Economies Benefit from Revenue Diversification?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 79-101, October.
    15. El Moussawi, Chawki & Mansour, Rana, 2022. "Competition, cost efficiency and stability of banks in the MENA region," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 143-170.
    16. Ji, Mingming & Jiang, Liangliang, 2022. "Aggressive CEOs and bank mergers and acquisitions," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(3).
    17. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2010. "The effects of focus versus diversification on bank performance: Evidence from Chinese banks," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1417-1435, July.
    18. Pietro Alessandrini & Luca Papi & Alberto Zazzaro, 2003. "Banks, regions and development," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(224), pages 23-55.
    19. Jeon, Bang Nam & Wu, Ji & Chen, Limei & Chen, Minghua, 2020. "Diversification, efficiency and risk of banks: New consolidating evidence from emerging economies," School of Economics Working Paper Series 2020-10, LeBow College of Business, Drexel University.
    20. repec:zbw:bofrdp:2011_007 is not listed on IDEAS
    21. Fang, Yiwei & Hasan, Iftekhar & Marton, Katherin, 2011. "Market reforms, legal changes and bank risk-taking: evidence from transition economies," Bank of Finland Research Discussion Papers 7/2011, Bank of Finland.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnd:arjebs:v:4:y:2012:i:12:p:691-702. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Muhammad Tayyab (email available below). General contact details of provider: https://ojs.amhinternational.com/index.php/jebs .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.