This thesis utilizes monthly data covering the period from November 1999 to December 2005, to examine the feasibility of bank merger among Taiwan’s three kind of banking firms, based on scale economies and strategic dependence. The cost structure analyses have shown that Domestic Bank, Foreign Bank and Investment & Trust Company are all fallen into the stage of scale diseconomies, and that a merger of Domestic Bank and Foreign Bank seems to be helpful in reducing the current status of the scale diseconomies. The analyses of mutual dependence in operations have shown the following: (1) foreign banks are strategically substitutable to domestic banks, and (2) domestic banks are strategically complementary to foreign banks. These results provide useful directory references for the relevant bank firms in planning merger activities.