Impact of Operational Risk Toward the Efficiency of Banking - Evidence from Taiwans Banking Industry

Asian Economic and Financial Review

Cheng-Ping Cheng^1¹ 

[1] Department of Finance, National Yunlin University of Science and Technology, Taiwan Department of Finance, National Yunlin University of Science and Technology, Taiwan Department of Economics, Soochow University, Taiwan Department of Accounting, Soochow University, Taiwan Department of Economics, Soochow University, Taiwan^1

关键词: Basel II;    Operational risk;    Top-Down method;    Stochastic frontier;    Cost efficiency;    Time series;    GARCH.;   

DOI  :  10.18488/journal.aefr.2018.86.815.831

学科分类：社会科学、人文和艺术（综合）

来源: Asian Economic and Social Society

【 摘 要 】

This study adopts a GARCH model to estimate the operational risk of Taiwan?s banking industry by the Top-Down method. Based on the approach of Battese and Coelli (1995) we estimate the Trans-log cost model and the inefficient model simultaneously by the Maximum likelihood method. Our empirical result shows that the operational risks have a significantly positive impact on cost inefficiency - that is, regardless of which methods we use for calculation, operational risk drives down economic efficiency. Comparing with the basic index method, the multi-factor model of the Top-Down method is better at analyzing the relationship of operational risk and efficiency.

【 授权许可】

CC BY