IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v56y2020i5p1003-1023.html
   My bibliography  Save this article

Determinants of Banking Efficiency and Survival in Taiwan with Consideration of the Real Management Cost

Author

Listed:
  • Lien-Wen Liang
  • Cheng-Ping Cheng
  • Yipin Lin

Abstract

By using a real management cost method to re-calculate economic costs at Taiwanese banks, this article sheds light on the relationship between CAMELS (capital, asset quality, management, earnings, liquidity, and sensitivity) theory and bank survival by analyzing the impact of key CAMELS indices on cost efficiency, which in turn influences bank survival. We estimate cost efficiency at banks using stochastic frontier analysis (SFA) and economic provisions for loan loss based on Shen and Chen (2010). The seven key determinants are the capital adequacy ratio, the non-performing loan ratio, the deposit growth rate, the return on assets, the leverage ratio, the scale of assets, and whether a bank is owned by a financial holding company. These CAMELS indices significantly affect cost efficiency at surviving banks and failed banks and have different effects. The measure of provisions for loan losses significantly affects cost efficiency at banks and makes the outcomes closer to reality. We also outline some important policy implications to avoid banking crises.

Suggested Citation

  • Lien-Wen Liang & Cheng-Ping Cheng & Yipin Lin, 2020. "Determinants of Banking Efficiency and Survival in Taiwan with Consideration of the Real Management Cost," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(5), pages 1003-1023, April.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:5:p:1003-1023
    DOI: 10.1080/1540496X.2018.1470504
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2018.1470504
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2018.1470504?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Evžen Kočenda & Ichiro Iwasaki, 2022. "Bank survival around the world: A meta‐analytic review," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 108-156, February.
    2. Zhou, Dan & Kautonen, Mika & Dai, Weiqi & Zhang, Hui, 2021. "Exploring how digitalization influences incumbents in financial services: The role of entrepreneurial orientation, firm assets, and organizational legitimacy," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    3. Hai-Yen Chang & Lien-Wen Liang & Yu-Luan Liu, 2021. "Using Environmental, Social, Governance (ESG) and Financial Indicators to Measure Bank Cost Efficiency in Asia," Sustainability, MDPI, vol. 13(20), pages 1-20, October.

    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:mes:emfitr:v:56:y:2020:i:5:p:1003-1023. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    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.