How does competition affect Taiwan’s banks?
Date Issued
2012
Date
2012
Author(s)
Wu, Hung-Shen
Abstract
Due to the fact that Taiwan’s banking industry has been in over-banking for a long time, government was decreasing bank competition by raising concentration of banking to enhance competitiveness and raise the efficiency of operation. The degree of competition changed when the market structure had been adjusted by government. The purpose of this research is how competition affects survival of Taiwan’s bank. According to FFIEC’ CAMELS standard, we selected 23 financial ratio variables to implement Principle Component Analysis (PCA) in order to refine the index of CAMELSG, and we make the index of CAMELSG be under control in parametric survival model. On the other hand, we use the Lerner index to measure the degree of competition, Lerner index has a negative relationship with degree of competition.
The main results show that (1) Liquidity index、Market share of loan、Age、Lerner index have significant positive effect on survival rate、average time of survival, and negative effect on hazard rate. And (2)Lerner index has negative relationship with degree of competition, so we can infer that if there were fewer banks in the market, the firm would have been more powerful during price negotiation and raise the net interest margin of loan. It would really help the bank’s operation.
Subjects
competition
Lerner index
principle component analysis
parametric survival model
Type
thesis
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