Effect of Internationalization on the Cost Efficiency of Taiwan’s Banks

Cheng-Ping Cheng, Lien-Wen Liang and Chen-Ta Huang

Emerging Markets Finance and Trade, 2014, vol. 50, issue S6, 204-228

Abstract: We focus on the effect of internationalization on the cost efficiency of banks by studying Taiwan as a sample for developing countries. We find that (1) increasing overseas businesses and foreign exchange deposits increases cost efficiency; (2) expanding offshore banking units increases bank efficiency; and (3) the profitability of a bank’s overseas branch is not a critical factor behind the differences in cost efficiency across both financial holding company (FHC) banks and non-financial holding company (non-FHC) banks. Finally, our metafrontier empirical results illustrate that FHC banks in Taiwan show better technical performance in cost control than non-FHC banks.

Date: 2014
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DOI: 10.1080/1540496X.2014.1013857

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