Economies of Scale and Economies of Scope in Taiwan Financial Holding Companies from Mergers and Acquisitions

• Main Authors: Tsai Chih-Ming, 蔡知敏
• Other Authors: 作者未提供
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/78zzj5

碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 92 === As the new economic time comes and the information technology spreads, the way that the financial market works has also changed gradually. Confronted with the change, most financial institutions maintain their growth and enhance their competency by strategic mergers and acquisitions. The passage of the Law of Financial Holding Company in mid 2001 had energized Taiwan’s banking industry, sketched the vision of innovation and caused the merger of many financial institutions to establish a financial holding company. However, whether the synergy of a holding company’s share of resource and cross selling can bring about the economies of scale or the economies of scope is worth examining. This research is based on the 30 companies of 3 different subsidiaries, which are banks, insurance and security firms, under 14 financial holding companies founded in 2003. The empirical period is from 1998 to 2003, with a total of 6 years. The empirical study applies the Panel of Limdep 8.0 program, using the Translog cost function, to estimate the change of index of cost inefficiency, economies of scale and the economies of scope before and after the foundation of financial holding companies. With the limit time of the panel data, the result reveals that economies of scale exists both before and after the foundation of financial holding companies and the difference is very small, which means the scale can be further enlarged. In addition, the security already reached its optimal scale. As for the economies of scope, the combination of banks and insurance firms will have the best performance, which means the costs are complementary between the outputs of the both subsidiaries. On the contrary, the integration of banks and security firms or security firms and insurance firms does not produce any economies of scope.