Do undesirables matter on the examination of banking efficiency using stochastic directional distance functions
Tai-Hsin Huang and
The Quarterly Review of Economics and Finance, 2017, vol. 65, issue C, 194-211
This paper aims to gain further insights into whether the First Financial Restructuring (FFR) policy improves the technical efficiency of Taiwan’s banks during the period 1999–2012, using the directional technology distance function (DDF). DDF simultaneously allows for the expansion of the desirables and the contraction of the undesirables, which is able to depict a bank’s true production activities. We find that the banks have a lower technical inefficiency with the preferred model compared to the other models. Before 2002, the technical inefficiency exhibits a gradual upward trend and then posts a downward trend during the FFR period, due to enhanced banking and benefits obtained from compliance with FFR. The inefficiency scores deteriorate sharply, during the “credit card and cash card crisis” in 2006 and “the subprime mortgage crisis” in 2008. Public and financial holding company (FHC) banks are respectively more efficient than private and non-FHC banks.
Keywords: Technical efficiency; Directional technology distance function; Undesirable outputs; Public banks; Private banks; Financial holding company (search for similar items in EconPapers)
JEL-codes: D24 G21 G28 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:65:y:2017:i:c:p:194-211
Access Statistics for this article
The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty
More articles in The Quarterly Review of Economics and Finance from Elsevier
Series data maintained by Dana Niculescu ().