TY - JOUR
T1 - Is too much competition bad for the industry? A Taiwanese banking case
AU - Choi, Paul M.S.
AU - Huang, Seth H.
N1 - Funding Information:
This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2015S1A5A2A01010876). Standard disclaimer rules apply and all errors are of our own.
Publisher Copyright:
© Paul M.S. Choi, Seth H. Huang, 2016.
PY - 2016
Y1 - 2016
N2 - The authors examine the relationship between net interest margin, a measure of banks' pricing power, and lending market shares in the environment of regulation changes in Taiwan from 1991 to 2009. Specifically, the effect on net interest margins from mandatory industry consolidation is studied in depth. The authors find that firm market shares in the first period have positive and highly significant impacts on the bank profitability, but for the second period, the authors find increased non-performing loans. During the second period, the credit lending market share became a main profit component but with a negative impact on profitability. Additionally, the focus of lending type shifted from collateralized to credit lending, a type of lending that has much higher profitability, but such lending has negative and significant effects on banks' profitability. The results suggest a mandatory industry-wide consolidation affected the bank lending types, with banks focusing more on increasing short-term market share through credit lending than on profitability.
AB - The authors examine the relationship between net interest margin, a measure of banks' pricing power, and lending market shares in the environment of regulation changes in Taiwan from 1991 to 2009. Specifically, the effect on net interest margins from mandatory industry consolidation is studied in depth. The authors find that firm market shares in the first period have positive and highly significant impacts on the bank profitability, but for the second period, the authors find increased non-performing loans. During the second period, the credit lending market share became a main profit component but with a negative impact on profitability. Additionally, the focus of lending type shifted from collateralized to credit lending, a type of lending that has much higher profitability, but such lending has negative and significant effects on banks' profitability. The results suggest a mandatory industry-wide consolidation affected the bank lending types, with banks focusing more on increasing short-term market share through credit lending than on profitability.
KW - Banking
KW - Competition
KW - Net interest margin
KW - Taiwanese banking industry
UR - http://www.scopus.com/inward/record.url?scp=84978870891&partnerID=8YFLogxK
U2 - 10.21511/imfi.13(2-1).2016.01
DO - 10.21511/imfi.13(2-1).2016.01
M3 - Article
AN - SCOPUS:84978870891
SN - 1810-4967
VL - 13
SP - 128
EP - 140
JO - Investment Management and Financial Innovations
JF - Investment Management and Financial Innovations
IS - 2
ER -