Efficiency Evaluation of Taiwan's Commercial Banks after IFRS Adoption: A Two-System Network Data Envelopment Approach

Abstract

The objective of this study is to assess the operational efficiencies of Taiwanese commercial banks from 2013 to 2022, following the adoption of the International Financial Reporting Standards (IFRS) in 2013. This study introduces an extended non-convex two-system network data envelopment analysis (DEA) model, which decomposes the production process into two sub-processes: profitability and marketability stages. Additionally, the study categorizes eighteen listed commercial banks into two groups based on their affiliation with financial holding companies (FHCs). The results of the Mann-Whitney U test reveal significant differences in both profitability efficiency and marketability efficiency between FHC banks and non-FHC banks. However, the overall efficiency of FHC banks does not differ significantly from that of non-FHC banks during the sample period. The empirical findings indicate that, on average, banks affiliated with FHCs outperform those not affiliated with FHCs in terms of profitability efficiency, with this effect being statistically significant. Conversely, FHC banks exhibit lower marketability efficiency compared to non-FHC banks. These results suggest that while FHC affiliation can enhance profitability efficiency, it may not necessarily improve marketability efficiency.