The Efficiency of Financial Holding Companies in Korea

Garam Ahn, Frederick Dongchuhl Oh and Junghum Park
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Garam Ahn: KAIST College of Business
Frederick Dongchuhl Oh: KAIST College of Business

Korean Economic Review, 2020, vol. 36, 29-58

Abstract: This study uses data envelopment analysis to examine whether the government-driven policy of promoting the creation of financial holding companies enhances the productive efficiency of the Korean financial system. We find that financial holding company affiliation has no substantial effects on commercial banks, life insurance companies, and securities companies, regardless of whether or not the financial holding company is owned by the government. However, we find a positive association between the asset diversification of financial holding companies and the productive efficiencies of their affiliated commercial banks, indicating a possibility that financial holding companies can improve efficiency within creased diversification. Our results suggest that the Korean government’s policy of promoting the creation of financial holding companies should be reconsidered.

Keywords: Financial Holding Company; Efficiency; Data Envelopment Analysis; Financial Institution; Diversification (search for similar items in EconPapers)
JEL-codes: C14 C61 G21 G22 G24 G28 (search for similar items in EconPapers)
Date: 2020
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