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Does Size Matter? Finding The Profitability And Marketability Benchmark Of Financial Holding Companies

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  • SHIH-FANG LO

    (International Division, Chung-Hua Institution for Economic Research, Rm. 516, 75 Chang-Hsing St., Taipei 106, Taiwan, R.O.C.)

  • WEN-MIN LU

    (Graduate School of National Defense Financial Resource Management, National Defense Management College, National Defense University, 150 Ming-An Rd., Jong-Ho, Taipei County 235, Taiwan, R.O.C.)

Abstract

The aim of this paper is to explore the efficiency and the benchmarks of financial holding companies (FHCs) for a small open economy, Taiwan. We employ a two-stage production process including profitability and marketability performance using a non-parametric frontier method — data envelopment analysis (DEA). Furthermore, the factor-specific measure and BCC (Banker–Charnes–Cooper) model are combined together not only to identify the inputs/outputs that are most important but also to distinguish those FHCs which can be treated as benchmarks. Our empirical result shows that (1) big-sized FHCs are generally more efficient than small-sized ones; (2) FHCs with the main body of insurance averagely perform better than the other two types (banks and securities); (3) while small efficient FHCs are easily to become benchmarks, big efficient FHCs are deemed as competitive niche players; (4) further mergers and acquisitions among FHCs should be considered so as to achieve economies of scale. The profitability/marketability matrix of FHCs is also presented.

Suggested Citation

  • Shih-Fang Lo & Wen-Min Lu, 2006. "Does Size Matter? Finding The Profitability And Marketability Benchmark Of Financial Holding Companies," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 23(02), pages 229-246.
    • Handle: RePEc:wsi:apjorx:v:23:y:2006:i:02:n:s0217595906000930
    DOI: 10.1142/S0217595906000930
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    Cited by:

    1. Wu, Yueh-Cheng & Wei Kiong Ting, Irene & Lu, Wen-Min & Nourani, Mohammad & Kweh, Qian Long, 2016. "The impact of earnings management on the performance of ASEAN banks," Economic Modelling, Elsevier, vol. 53(C), pages 156-165.
    2. Kao, Chiang, 2014. "Network data envelopment analysis: A review," European Journal of Operational Research, Elsevier, vol. 239(1), pages 1-16.
    3. Aleksandra Marcikić Horvat & Nada Milenković & Branislav Dudić & Branimir Kalaš & Boris Radovanov & Alexandra Mittelman, 2022. "Evaluating Bank Efficiency in the West Balkan Countries Using Data Envelopment Analysis," Mathematics, MDPI, vol. 11(1), pages 1-15, December.
    4. Liu, John S. & Lu, Louis Y.Y. & Lu, Wen-Min & Lin, Bruce J.Y., 2013. "A survey of DEA applications," Omega, Elsevier, vol. 41(5), pages 893-902.
    5. J-L Hu & C-Y Fang, 2010. "Do market share and efficiency matter for each other? An application of the zero-sum gains data envelopment analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(4), pages 647-657, April.
    6. Xiao, Huijuan & Wang, Daoping & Qi, Yu & Shao, Shuai & Zhou, Ya & Shan, Yuli, 2021. "The governance-production nexus of eco-efficiency in Chinese resource-based cities: A two-stage network DEA approach," Energy Economics, Elsevier, vol. 101(C).
    7. Tasso Brandt & Torben Schubert, 2013. "Is the university model an organizational necessity? Scale and agglomeration effects in science," Scientometrics, Springer;Akadémiai Kiadó, vol. 94(2), pages 541-565, February.
    8. Wen‐Min Lu & Qian Long Kweh & Dong‐Sing He & Jui‐Min Shih, 2017. "Performance analysis of the cultural and creative industry: a network‐based approach," Naval Research Logistics (NRL), John Wiley & Sons, vol. 64(8), pages 662-676, December.
    9. Yueh-Chiang Lee & Yao-Hung Yang, 2014. "Performance Of Financial Holding Companies In Taiwan: An Application Of Network Data Envelopment Analysis," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 8(3), pages 19-30.
    10. Luis Enrique Valdez-Juárez & Dolores Gallardo-Vázquez & Elva Alicia Ramos-Escobar, 2019. "Organizational Learning and Corporate Social Responsibility Drivers of Performance in SMEs in Northwestern Mexico," Sustainability, MDPI, vol. 11(20), pages 1-23, October.
    11. Liu, Hsiang-Hsi & Huang, Chin-Wei & Chiu, Yung-Ho & Huang, Hsiao-Chin, 2015. "Using A Three Stage Super-Sbm Model To Analyze The Influence Of Bank'S Internationalization And Risk On The Operational Efficiency," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(2), pages 213-229, December.
    12. Liang-Han Ma & Jin-Chi Hsieh & Ying Li & Yung-Ho Chiu, 2021. "Evaluating Efficiency Change in Taiwan’s Financial Industry," SAGE Open, , vol. 11(2), pages 21582440211, April.
    13. Lu, Wen-Min & Liu, John S. & Kweh, Qian Long & Wang, Chung-Wei, 2016. "Exploring the benchmarks of the Taiwanese investment trust corporations: Management and investment efficiency perspectives," European Journal of Operational Research, Elsevier, vol. 248(2), pages 607-618.
    14. Tasso Brandt & Torben Schubert, 2014. "Is the university model an organizational necessity? Scale and agglomeration effects in science," Chapters, in: Andrea Bonaccorsi (ed.), Knowledge, Diversity and Performance in European Higher Education, chapter 8, pages iii-iii, Edward Elgar Publishing.
    15. Mohammad Nourani & Qian Long Kweh & Wen-Min Lu & Ikhlaas Gurrib, 2022. "Operational and investment efficiency of investment trust companies: Do foreign firms outperform domestic firms?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-26, December.
    16. Brandt, Tasso & Schubert, Torben, 2012. "Is the University Model an Organizational Necessity? Scale and Agglomeration Effects in Science," Papers in Innovation Studies 2012/1, Lund University, CIRCLE - Centre for Innovation Research.
    17. Hung, Shiu-Wan & Wang, An-Pang, 2012. "Entrepreneurs with glamour? DEA performance characterization of high-tech and older-established industries," Economic Modelling, Elsevier, vol. 29(4), pages 1146-1153.

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