Effects of financial reform on productivity change

Industrial Management and Data Systems - 2008
Li‐HuaHuang1, Hsing‐ChinHsiao1, Mei‐AiCheng1, Shyr‐JuhChang2
1Department of Accounting Information, National Taipei College of Business, Taipei, Taiwan, Republic of China
2Department of Accounting Information, Chihlee Institute of Technology, Banciao City, Taiwan, Republic of China

Tóm tắt

PurposeThe aim is to investigate the effects of the first financial restructuring (FFR) on productivity growth, technical progress and efficiency change, using data from 42 commercial banks in Taiwan from 2001 to 2004.Design/methodology/approachData envelopment analysis is applied to compute the Malmquist index of productivity change.FindingsIt is found that Taiwan commercial banks on average experienced a 117.39 percent increase in productivity growth, of which is 2.11 percent is due to efficiency change and 115.28 percent to technical progress over the four year period. In addition, during the four year period, a 1 percent reduction in the nonperforming loan ratio resulted in 1.85 percent growth in productivity; a 1 percent increase in the capital adequacy ratio led to 2.15 percent growth in productivity.Practical implicationsIt can be concluded that after the FFR, the productivity growth, technical progress, and efficiency change all improve, with the lower nonperforming loan ratio contributing to this improved performance.Originality/valueThe study provides evidence of the productivity change of the banking industry in Taiwan in response to the FFR. It also contributes additional empirical evidence on the impact of a reform on bank productivity in a developing country.

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