Does Bank Performance Benefit from Non-traditional Activities? A Case of Non-interest Incomes in Taiwan Commercial Banks

Li-Wei Huang ； Yi-Kai Chen

《Asian Journal of Management and Humanity Sciences》 1卷3期 (2006/10) Pp. 359-378

https://doi.org/10.6413/AJMHS.200610.0359

並列摘要

Non-interest incomes have become an increasingly important part of banks' operating incomes. Most banks regard non-interest incomes as one of the stable sources of bank revenues. In general, the industry believes increasing the ratio of non-interest incomes to operating incomes can not only improve profitability but also reduce the risk to the bank. However, DeYoung and Roland (2001) have stated increasing fee-based activities increases the volatility of bank revenues and earnings. Stiroh (2004) and DeYoung and Rice (2004) showed an increased reliance on non-interest incomes did not reduce the risk level of the bank. The objective of this study is to investigate whether the reliance on different sources of non-interest incomes will affect bank efficiency. We employ the data envelopment approach (DEA) to calculate the cost efficiency of Taiwan domestic commercial banks from 1992 to 2004. The findings are that the banks either with relatively higher or lower ratios of non-interest incomes to operating incomes perform more cost-efficiently during the examination periods. The relative optimal level of non-interest incomes exists in the Taiwan banking industry.

並列關鍵字

bank efficiency ； data envelopment analysis DEA ； non-interest incomes ； commercial bank