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A STUDY ON THE FINANCIAL OPERATION AND SUSTAINABILITY EFFICIENCY OF THE TAIWAN BANKING INDUSTRY - TWO-STAGE DDF

Hsu, Shao-Yin

Department of Accounting, Ming Chuan University

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Abstract

This study is prepared with a total of 37 banks in Taiwan in 2022-2024 as the research sample and with a two-stage dynamic directional distance function (DN-DDF) adopted. In addition to adopting parallel analysis of financial and operational efficiency in stage 1, the sustainability efficiency analysis is adopted in stage 2. The DN-DDF method is adopted in this study to overcome the limitations of static models.

In terms of overall efficiency, the ranked top three banks include CTBC, CLB and KTB, which are long-established banks in Taiwan. The ranked last three banks include DBSB, NCB, and RICB, which have experienced financial crises and been acquired and merged, or are newly established online banks; however, online banks have performed well in the sustainability stage. In addition, the so-called state-owned banks, including TCB (ranked 21^st), BOT (ranked 20^th), LBOT (ranked 24^th), and CHB (ranked 26^th), all ranked in the lower half of the overall efficiency classification, and performed poorly in the stage of sustainability efficiency. State-owned banks should pay more attention to ESG. Overall, the efficiency performance ​in Stage 1 and Stage 2 is good, but not in the sustainability stage, which is yet to be improved.

Keywords: DDF, bank, efficiency, ESG