کفایت سرمایه مبتنی بر ریسک در ارزیابی بر روی ریسک ناشی از عجز از پرداخت دیون و اجرای برنامه های مالی در صنعت بانکداری تایوان
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18254||2005||43 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Research in International Business and Finance, Volume 19, Issue 1, March 2005, Pages 111–153
This study applies the index of insolvency-risk (IR) to the failure risk in Taiwan's banking industry during 1993–2000, to explore the relationship between capital adequacy (CA) in assessing on IR and financial performances. Specifically, the current work is to indicate the diverse effects before and after the revision of capital-adequacy regulation in Taiwan, that is, at the end of 1998. The empirical results show a positive relationship between the CA and the IR index, and a significantly positive relationship exists between the CA and various financial performances. Alternatively, it shows a significantly negative relationship between IR and financial performances. This work provides sound and safe suggestions about risk management for all the stakeholders, government, banking and financial industry.
In the 1980s, the global banking system began a series of transformations from being ‘closed’ to being ‘open’. This led to the gradual loss of the competitive edge internationally held by many countries whose banking and finance had strict controls, due to the continual loosening of regulations in the international banking industry. Strict controls arose from the numerous laws and restrictions governing the banking industry in each country, indirect subsidization, and administrative standards, which were inconsistent with the loosening of regulations or full deregulation. For example, the Taiwanese Taiwan's banking environment adjusted to rapid economic growth as industry demanded for better and more banking services, as well as the establishment of more branch offices, when Taiwan joined the World Trade Organization. Financial management authorities accelerated the pace of financial reforms, and implemented liberalization of interest and exchange rates along with capital accounts and securities. In addition, they have deregulated financial services, and passed legislation such as the Financial Institutions Merger Act and the Financial Holding Company Act, as well as encouraged mergers among financial institutions and branching into new business arenas so as to remain internationally competitive. Due to the downturn in the Taiwan's real estate and stock markets recently, traditional businesses have shrunk in size, and many companies have moved abroad basing their decision primarily on profitability, which has resulted in higher unemployment rates. As a result, the total economic growth for 2001 was −1%. On the other hand, as the banking industry was over-saturated, it led to the merging of financial institutions and vicious competition in the marketplace. An increase in the riskiness of loans, and a continued increase in the ratio of overdue loans, arose because of the increase in the proportion of marginal customers. Should we be unable to quickly address this banking issue, the situation could possibly worsen and become like the Japanese financial crisis, thereby imperiling Taiwan's economic gains overnight. In view of this, the Taiwanese Legislative Yuan quickly passed The Six Financial Laws giving government officials the legal basis to promote the restructuring of banking. The financial risk of the banking industry has increased greatly over recent years partly due to the capitalist market being looming, as well as increasingly more dubious loans by banks to enterprises. Dubious loans and accelerating bank withdrawals have increased to almost surpass the loss from non-performing loans, so the bank's credit adequacy is still worsening and confirming the need for a focus on the safety of bank capital. The banking industry is an industry with high financial leveraging and high risk. If management is overly conservative, they will not only inhibit the functions and growth of the organization, but will also be unable to satisfy the credit needs of society. On the other hand, if they wantonly expand the sales base and assume a great deal of risk; they may sustain serious loss, which may include management crisis or even bankruptcy. As such, risk management is a key part of the banking industry. Recently international banking losses and bankruptcies have become more frequent. For example in 1991 there were one thousand US commercial banks listed as problematic banks by the FDIC, and in 1992 two thousand savings institutions went out of business. In 1995, Japan's largest credit union, The Credit Union of Mu Jin, went out of business and the second largest local bank, Hyogo Bank, closed and liquidated its assets. England's Barings Bank filed for bankruptcy in February 1995 – and was subsequently purchased by ING Bank – due to Nick Lesson's manipulation of the Nikkei Stock Index Futures, which led to its massive loss of US$ 1.5 billion. Taiwan in 1994, after seeing a run on the Changhwa Fourth Credit Cooperative, numerous cases of embezzlement and runs on financial institutions occurred. The banking industry is facing serious competition and must fully comprehend the nature of the changes in its environment, as well as the possible risks. Those risks must be clearly defined so as to fully understand their nature. By comprehending these events, the industry can strive for proper and effective policy and management methods. In view of Taiwan's entry into WTO, the outcomes of those managing of financial institutions now face strict tests and trials. The days of strong profitability no longer exist, and competitiveness is gradually decreasing. Researchers need to actively pursue methods of reform, but not allow reduction of solvency by problematic financial institutions. Banks are in the business of investment by coupling high risk with high returns making the issue of the bank's risk of involvement with non-performing loans even greater, thereby bringing urgency for this current research. The financial-related performance and the risk management of the banking industry currently require the research to focus upon the tools to assess risks, which occur in capital management. Existing researchers give little focus to the implementation of fundamental risk capital management and its effect on insolvency risk and financial performance, which is what sparked interest in this research. This research covers the pre- and post-implementation stages of capital adequacy, estimates the capital rate of return for the financial industry, along with standard fluctuation of profit and risk, and discusses the effect these have on a bank's risk (insolvency risk) of failure. It also analyzes the different outcomes based upon a bank's size of operation, time elements, new and state-owned banks, and the connectedness of the bank's financial performance. Based upon this, the purpose of this research is to focus on three areas of interest: 1. The relation between capital adequacy and bank insolvency risk index, and the relative differences existing in pre- and post-regulation periods. 2. The relation between capital adequacy and financial performance, and the relative differences existing in pre- and post-regulation periods. 3. The interaction and relationship between the insolvency risk of banks and financial performance, and the relative differences found in pre- and post-regulation periods.
نتیجه گیری انگلیسی
Currently, the measurement indicators of capital management are all utilizing traditional capital ratio to explore a bank's risk, but the capital management indicator is not the only one. For a long period of time, we should have paid close attention to the quality control of bank asset risk in order to conform to the rules set by government officials. This paper shows the substantial proof and research by first applying the insolvency risk index to Taiwan's banks, taking a total of 40 sample banks, which include 24 old privately- and state-owned banks and 16 new-private banks that were gradually established after 1992. After building a substantial proof model, testing took place using original least square (OLS) and then by adjustment through weighted least square (WLS), which has brought about an important conclusion. Exploring the relationship between capital adequacy and the insolvency risk index, and further analyzing the differences in pre- and post-regulation, shows that the two have a significantly positive relationship. The higher (lower) the capital adequacy of a commercial bank, the higher (lower) its insolvency risk index will be. The result is in harmony with the assertion of portfolio theory, and is consistent with the evidences of Kahane (1977); Koehn and Santomero (1980); Kim and Santomero (1988); Yu and Chen (1993); Chen (1993), and Lin (1994). In 1998 prior to the new regulation, these two had a negative relationship, which only significantly affected new-private banks, and could effectively decrease insolvency risk index. There was no noticeable effect on state-owned banks. However, during post-regulation the two had a positive relationship, wherein new and state-owned banks alike reached a significant standard. The main reason for this was the decrease in profitability for the 2 years of post-regulation, which created an increase in insolvency risk, which affected everything during that period. These results are in line with hypothesis one's expectations, and also prove the scholars of the Portfolio Theory negate the effectiveness of capital management. When it is felt that capital adequacy management tends to be strict, it will lead to banks taking greater risks, which in turn, will lead to more vulnerability to failure and bankruptcy. The asset size and insolvency risk index also have a positive relationship, but prior to the new adequacy regulation it was a negative relationship. It was less significant during post-regulation though. We need to further analyze the difference and results of the relationship between capital adequacy and financial performance with regard to pre- and post-regulation, as they have a significantly positive relationship. This shows that the higher (lower) capital adequacy of commercial banks, the better (worse) it is financial performance. After the implementation of the new regulation measures in 1998, they came to have a positive relationship, wherein new and state-owned banks all reached a significant standard. That is, after the implementation of the new regulatory measures, banks’ financial performance actually did improve. However, with the passing of time, the trend of financial performance sloped downward. The effect that capital adequacy had on profit margin (NIS) in new and state-owned banks are not very significant during post-deregulation. Asset size and financial performance have a positive relationship, but it did not significantly affect new-private banks in post-regulation. This signifies that large and old Taiwan's banks do not experience a decrease in profitability simply because of their massive asset size. Instead, they are able to withstand economic downfalls and financial crises, and maintain stable profitability. These results are in line with hypothesis two as shown in this paper. As this paper advocates the standpoint of bank management and operations (meaning that it supports the opponent's position), the results indicate: (1) During the sample period (1993–2000), there were four key indicators of the financial performance of a bank: The economic downfall and the drop in price for real estate affected the Taiwan's banking industry, thereby bringing about an annual decrease in profits. Capital adequacy decreased annually due to the governmental regulatory measures. As both decreased, our research indicated they have a positive relationship. (2) This also shows that the scholars who advocate the Portfolio Theory feel that according to the great effect model, overly strict capital management leads to banks, which originally avoided risk, increasing investment portfolio risk by attempting to earn greater profits. In addition, we explored the relationship between insolvency risk index and financial performance. The two have a significantly negative relationship. This shows that the lower (higher) insolvency risk, the better (worse) financial performance. These results are in line with the verification of hypothesis three as shown in this paper, and prove that the phenomenon examined in Taiwan and its proof are in accord with the results found by Chou (1998), and Rivard and Thomas (1997). This shows that the profitability of Taiwan's banking industry is lacking stability, and as it declines, insolvency risk will gradually increase annually. The effect of the asset size of a bank on its financial performance also shows a positive relationship. The greater the asset size, the better its financial performance. They had a negative relationship during pre-regulation, but the effect on state-owned banks was more significant. They had a positive relationship during post-regulation, but the effect on new-private banks was more significant. With the passing of time, financial performance significantly decreased, showing that the profitability of Taiwan's banking industry is lacking stability, and as it declines, insolvency risk will gradually increase annually. Ultimately, we provide the following three points for comparing our results with the findings reported in Swary and Arbor (1980). (1) In brief, our paper examines the relationships among capital adequacy ratio, insolvency risk, and financial performance, based on the criterion on maximizing the efficiency of bank management. However Swary and Arbor (1980) focus on testing for the capital market efficiency. Their proposed concepts still need to be proved by empirical applications. (2) In our paper we focus on a long-term trend analysis to investigate the relationships among capital adequacy ratio, insolvency risk, and financial performance, using a weekly sample from 1993 to 2000. We further examine the financial performance of Taiwan's banking industry pre- and post the bank regulation period. This kind of investigation was not undertaken by Swary and Arbor (1980). Also our findings indicate that the impacts on new banks are more significant than on old banks after the regulation on capital adequacy is undertaken. This outcome clearly supports portfolio theory and the findings of Rivard and Thomas (1997).In contrast, Swary and Arbor (1980) examine whether abnormal returns are positive or negative by investigating share returns of a commercial firm after a merger activity is undertaken with the non-bank industry. Their work focuses on the short-term impacts on the value of shareholder's equity. (3) This study uses insolvency risk index as a risk measure. This measure can capture the probability of insolvent bankruptcy in the banking industry. Swary and Arbor (1980) use variance of returns as a risk measure, which has no ability to capture the probability of insolvent bankruptcy in the banking industry.