Evaluating Efficiency Change in Taiwan’s Financial Industry

Abstract

This study evaluates the performance of the financial industry with meta-frontier (MF) dynamic network data envelopment analysis (DN-DEA) from 2009 to 2015. We divide the sample into two groups, Financial Holding group (FHG) and Insurance & Securities group (ISG), for all decision making units (DMUs) of the financial industry. Our goal is to study the effects of operating performance across divisions and across periods and to compare the differences between these two different groups within Taiwan’s bank industry. We find the best business performance was during 2013, where the average value was 0.5485. The best average value of FHG was 0.7192 in 2012, and ISG was 0.7099 in 2010. FHG has best average overall efficiency (OE) value in 2009–2015 periods. However, the average technical efficiency gap ratio (TGR) value of ISG’s (0.7490) is larger than FHG (0.6959), indicating that business performance is affected by group and meta-frontier. FHG has a larger scale than ISG, and so, those firms can input a relatively large proportion of investments and resources to produce better performance. Finally, many DMUs have excess inputs of labor costs and operating expenses, resulting in an average TGR value that is lower than ISG in 2009–2015.