Does size matter? Finding the profitability and marketability benchmark of financial holding companies

Does size matter? Finding the profitability and marketability benchmark of financial holding companies

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Article ID: iaor20071890
Country: Singapore
Volume: 23
Issue: 2
Start Page Number: 229
End Page Number: 246
Publication Date: Jun 2006
Journal: Asia-Pacific Journal of Operational Research
Authors: ,
Keywords: statistics: data envelopment analysis
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.

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