اندازه گیری و طبقه بندی بهره وری فنی و تغییرات بهره وری تولید بانک های تجاری در تایوان

The banking industry plays a key role in the process of Taiwan’s economic development, and the structure of the financial system in Taiwan has turned from a controlled system into a liberalized one. In this paper, we employ the Malmquist productivity index approach, which is calculated from efficiency scores based on DEA linear programming technique, to measure the technical efficiency and productivity change of the 25 commercial banks in Taiwan over the post Asian crisis period 1997–2001. We find that the technical efficiencies of 15 banks have been improving while 10 banks have been declining over the period. It is also found that the banking industry has a decrease in technical efficiency but owns upward shifts of technology since year 1998. Based on technical efficiency and the efficiency change of the banks, we classify the 25 banks in Taiwan into four categories to help realize the competitiveness and technical progress of the banks. Some of the commercial banks need to search for financial innovation activities and carry on production differentiation to be competitive in the market.

Over the past 30 years, Taiwan has achieved high economic development with mild inflation and low unemployment. The financial system plays a key role in the process of Taiwan’s economic development. The banking industry in most economies has historically been much more regulated than other industry. Unlike other industries, the collapse of banks can have economy-wide repercussions as the payments system gets disrupted. Such regulation has been all the more stringent in the developing economies where controls on banking activities have been imposed to meet social and economic objectives of development. Thus, not only have there been strict controls on interest rate, there have also been stringent regulations related to branch licensing, directed credit programs, and mergers. Before liberalization, the banking sectors of Taiwan had these regulations as well. In the 1990s, the central bank of Taiwan has initiated a number of liberalization measures to encourage commercial banks to gradually move toward a more market-driven. The rapid advances in computer and communications technology have led to the development of new bank services and financial instruments. More important, a large number of Taiwan economies undertook massive liberalization of banking sectors to make them more productive and efficient. The widespread relaxation of the financial system has resulted in a more efficient financial market and enhanced financial technology. The structure of the financial system is then turning from a controlled system into a liberalized one. Especially, when the highest growth of region during the 1990s was hit by the Asian crisis in 1997, one realizes that an efficient financial system must have a sound regulatory system, not only to help financial institutions achieve expected development but also to prevent from relying on risk-taking. In Taiwan, the principal government agencies responsible for the supervision of financial institutions are the Central Bank of China, the Ministry of Finance, and the Central Deposit Insurance Corporation. These three bank regulators use the CAMELS rating system, which consists of six categories, including capital adequacy, asset quality, management, earnings, liquidity, and sensitivity of market risk, to evaluate the banks in Taiwan. This system relies on various financial ratios obtained from periodic reports of the entities under regulators’ jurisdiction. The ratios are also aggregated into performance indices based on various weighting or scoring schemes. Although the aggregation of the ratios could follow a standard procedure, the complicated processes may involve subjective judgment. Furthermore, the changing economic conditions have made such aggregations even more difficult, increasing the need for a more reliable way to express a bank’s financial condition. The many technological and regulatory changes affecting banking in recent years have substantially altered the environment in which banks operate. Such changes may have significantly altered the technology of bank production, with possible consequences for long-run viability of the industry. Data envelopment analysis (DEA), developed by Charnes, Cooper, and Rhodes (1978), is a well established nonparametric approach used to evaluate the relative efficiency of a set of comparable entities called decision making units (DMUs) with multiple inputs and outputs. Numerous DEA theoretical and application studies have been reported, such as Färe et al., 1994 and Seiford, 1996, and Cooper, Seiford, and Tone (2000). The efficiency performance of the banking industry has been a critical research stream that draws considerable attention from both academicians and policy makers (Bauer et al., 1998, Berger and DeYoung, 1997, Berger and Humphrey, 1997, Bhattacharyya et al., 1997, Elyasiani and Mehdian, 1990, Kao and Liu, 2004, Lin et al., 2009, Liu, 2009, Miller and Noulas, 1996, Mostafa, 2009, Rezvanian and Mehdian, 2002, Sherman and Ladino, 1995, Yeh, 1996 and Yue, 1992). Several authors have also utilized DEA efficiency measures as the evaluative information for the management component of CAMELS (Barr et al., 1993, Brockett et al., 1997, Siems, 1992 and Siems and Barr, 1998). A number of recent studies have focused on investigating productivity change, mainly by employing Malmquist productivity index approach (e.g. Alam, 2001, Ataullah et al., 2004, Guzmán and Reverte, 2008, Hauner, 2005 and Wheelock and Wilson, 1999), which is evaluated from efficiency scores based on DEA linear programming approach. This Malmquist productivity index technique enables separation of the catching-up or efficiency change effect, i.e., changes over time in the technical efficiency of each DMU with respect to best frontier, from technological change, i.e., the shift of best practice frontier over time due to technological progress. In this paper, we employ the Malmquist productivity index approach to investigate the technical efficiency and productivity change of commercial banks in Taiwan over the period 1997–2001, .i.e., the period after the Asian crisis. Based on the measurement of technical efficiency and efficiency change, we classify the commercial banks in Taiwan into four categories to help realize the competitiveness and technical progress. The rest of this paper is organized as follows: firstly, we introduce the approach of Malmquist productivity index, then we discuss the input and output factors used to measure the efficiency of commercial banks. Next, we utilize the case of Taiwan’s commercial banks for illustration, and finally, the results are discussed and some conclusions drawn from the discussion

The deregulation of the banking industry in 1990 has given banks in Taiwan much more operating flexibility. Facing high pressure from free competition within the financial market and the trend toward electronic banking, the general managers must fine-tune the weaknesses of their banks as compared with others and make appropriate adjustments before it is too late. The main objective of measuring efficiency is to gain an insight of how a bank being evaluated can improve efficiency with its current resource base or change resource allocation. This is especially important in the management of banks under changing environment. To measure changes in efficiency and productivity of the 25 commercial banks in Taiwan, this paper adopts the Malmquist productivity index, which is calculated from efficiency scores based on DEA linear programming technique. For analyzing the post Asian crisis period of bank performance, we utilize 1997 as a base year and examine productivity change of the banks over the years from 1997 to 2001. The derived results show that the technical efficiency of 15 banks has been improving over the evaluated periods while 10 banks have been declining. It is also found that the commercial banks have a decrease in technical efficiency but own upward shifts of technology. The Spearman rank correlation coefficients indicate that the value of the efficiency change of the 25 commercial banks between 1997 and 2001 are positively correlated with technical efficiency in 2001, catching-up efficiency, and shift in technology. This also reveals that between 1997 and 2001 most banks have made improvements. According to the values of technical efficiency and the efficiency change, we classify the 25 banks into four groups, namely, high competitiveness and a fast pace of progress (group A), high competitiveness but a slow pace of progress (group B), low competitiveness but a faster pace of progress (group C), and low competitiveness and a slower pace of progress (group D). Different groups of banks should have different strategies to survive in this changing environment. For example, with the idea of creative destruction, the banks in group D would be the victims of a Schumpeterian cleansing process and should consider to be merged with other banks. The widespread relaxation of the financial system has resulted in a more efficient financial market and enhanced financial technology. On the other hand, the keener competition in financial markets has a huge impact on various kinds of operating risk encountered by financial institutions. Since the commercial banks are very similar in Taiwan, a bank needs to execute the product differentiation and search for financial innovation activities to pursue strong competitiveness in the market and prevent from crisis with fewer sources.