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Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry

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  • Yu, Peiyi
  • Van Luu, Bac

Abstract

The objective of this paper is to examine the nature of the Taiwanese banking sector and to analyze the impact of financial liberalization on the Taiwanese banking industry. We present empirical evidence to show that the recent wave of bank mergers observed in other countries is also suitable for Taiwan. Based on empirical results for overall economies of scale and expansion path subadditivity, Taiwanese banks should obtain the benefit of scale economies by merging with other banks rather than expanding by opening more branches. Furthermore, we show that the Relative Market Power hypothesis--which postulates that greater market shares lead to higher profitability--finds empirical support in Taiwanese banking data after financial reforms were enacted. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Yu, Peiyi & Van Luu, Bac, 2003. "Banking Mergers: The Impact of Financial Liberalization on the Taiwanese Banking Industry," Review of Quantitative Finance and Accounting, Springer, vol. 20(4), pages 385-413, June.
    • Handle: RePEc:kap:rqfnac:v:20:y:2003:i:4:p:385-413
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    Cited by:

    1. George Halkos & Roman Matousek & Nickolaos Tzeremes, 2016. "Pre-evaluating technical efficiency gains from possible mergers and acquisitions: evidence from Japanese regional banks," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 47-77, January.
    2. Reddy, Kotapati Srinivasa & Nangia, Vinay Kumar & Agrawal, Rajat, 2013. "Indian economic-policy reforms, bank mergers, and lawful proposals: The ex-ante and ex-post ‘lookup’," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 601-622.
    3. Khee Giap Tan & Randong Yuan & Sangiita Wei Cher Yoong, 2017. "Assessing Development Strategies of Jiangsu and Taiwan: A Geweke Causality Analysis," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-28, December.
    4. Li-Hua Lai & Li-Chin Hung & Chau-Jung Kuo, 2016. "Do Well-Financial Holding Company Organized Banks in Taiwan Take More Risk?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-30, December.
    5. George E. Halkos & Roman Matousek & Nickolaos G. Tzeremes, 2016. "Pre-evaluating technical efficiency gains from possible mergers and acquisitions: evidence from Japanese regional banks," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 47-77, January.

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