A study of bank efficiency and ownership in Taiwan

Abstract

This paper uses a data envelopment analysis (DEA) approach to create a benchmark measure for the relative operating efficiency of the publicly operated banks as well as their private counterparts in Taiwan. From the estimated results, we find that there are significant differences in efficiency between privately-owned banks and publicly-owned banks. It shows that the efficiency gains from privatization may be substantial. By analysing the sources of inefficiency, we can also indicate the remedy for the specific publicly-owned banks, and affirm the validity of the privatization policy.