Cost structure and efficiency of the credit departments of the farmers' associations in Taiwan

Cheng Few Lee, Kehluh Wang, Ya Hui Peng

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This study addresses the cost structure and operational efficiency of the credit departments of the farmers' associations in Taiwan, adopting both stochastic cost frontier analysis and data envelopment analysis. The factors that influence operational efficiency are also examined. In particular, problems of loan quality are considered to account for the considerable amount of non-performing loans. The results of this study indicate that economies of scale exist. However, the credit departments of the farmers' associations do not benefit from economies of scope. Non-performing loans are associated with a cost increase of approximately 17.6%. Regression analysis verifies that the non-performing loan ratio significantly and negatively influences all indicators of efficiency and that the 1997 Asian financial crisis also has a negative impact on efficiencies.

Original languageEnglish (US)
Pages (from-to)385-403
Number of pages19
JournalReview of Pacific Basin Financial Markets and Policies
Volume9
Issue number3
DOIs
StatePublished - Sep 2006

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Bank efficiency
  • Credit departments of the farmers' associations
  • Data envelopment analysis
  • Stochastic cost frontier

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