| dc.description.abstract | The study aims to understand the correlations among Taiwanese commercial banks’ capital adequacy, ownership types (governance mechanisms) and their operating performance. The goal is approached by examining changes in the three dimensions during different financial transformations from 1998 to 2010 and in different ownerships, using annual financial data obtained from the database of the Taiwan Economic Journal, official websites of banks, and Condition and Performance of Domestic Banks, a quarterly report published by the Central Bank of Taiwan.
In this study, indicators of capital adequacy are BIS ratio, Tier I ratio, overdue rate, and coverage rate; indicators of governance mechanisms are ratios of foreign ownership, of foreign board members, of government ownership, of governmental board members, of board ownership, of share pledging by board members, and of voting rights to cash flow rights; indicators of operating performance are income before tax ratio, operating profit, operating expense ratio, earnings per share (EPS), return on equity (ROE), and return on assets (ROA).
As for results of our empirical analysis,
1. in terms of ownerships:
(1) “Private-run financial holding banks” performed significantly better than the other two types of banks in three variables: Tier I ratio, board ownership ratio, and income before tax ratio. However, their ratio of voting rights to cash flow rights is significantly higher.
(2) “State-run banks” performed significantly better in two variables: operating expense ratio and ROE.
(3) “Foreign investment banks” performed significantly better in coverage ratio. However, their ratio of share pledging by board is significantly higher than the others.
2. in terms of financial transformations:
(1) “Before Taiwan’s first-phase financial reform”, banks performed significantly better in two variables, Tier I ratio and operating expense ratio, compared to the other two transformation periods.
(2) “During the global financial crisis”, banks performed significantly better in five variables: BIS ratio, overdue rate, coverage rate, foreign ownership ratio, and ratio of foreign board members.
(3) “During Taiwan’s second-phase financial reform”, four of the variables were significantly smaller than in the other periods: ROA, ROE, income before tax ratio, and operating profit.
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