DOES SIZE MATTER? FINDING THE PROFITABILITY AND MARKETABILITY BENCHMARK OF FINANCIAL HOLDING COMPANIES

Shih-Fang Lo () and Wen-Min Lu ()
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Shih-Fang Lo: International Division, Chung-Hua Institution for Economic Research, Rm. 516, 75 Chang-Hsing St., Taipei 106, Taiwan, R.O.C.
Wen-Min Lu: Graduate School of National Defense Financial Resource Management, National Defense Management College, National Defense University, 150 Ming-An Rd., Jong-Ho, Taipei County 235, Taiwan, R.O.C.

Asia-Pacific Journal of Operational Research (APJOR), 2006, vol. 23, issue 02, 229-246

Abstract: The aim of this paper is to explore the efficiency and the benchmarks of financial holding companies (FHCs) for a small open economy, Taiwan. We employ a two-stage production process including profitability and marketability performance using a non-parametric frontier method — data envelopment analysis (DEA). Furthermore, the factor-specific measure and BCC (Banker–Charnes–Cooper) model are combined together not only to identify the inputs/outputs that are most important but also to distinguish those FHCs which can be treated as benchmarks. Our empirical result shows that (1) big-sized FHCs are generally more efficient than small-sized ones; (2) FHCs with the main body of insurance averagely perform better than the other two types (banks and securities); (3) while small efficient FHCs are easily to become benchmarks, big efficient FHCs are deemed as competitive niche players; (4) further mergers and acquisitions among FHCs should be considered so as to achieve economies of scale. The profitability/marketability matrix of FHCs is also presented.

Keywords: DEA; performance; reference-share measure; FHCs (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (17)

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DOI: 10.1142/S0217595906000930

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