A Study On Capital Structure, Stock Holds Proportion Of Institutions And Performance Of Taiwan Banks

Up to date, the Resource-Based Theory has been applied in understanding the relationship among capital structure, stock holds proportion of institutions, and performance of the bank industry. In this perspective, the study deals with capital structure (long term debts and stockholder's equity, be proxied by debt to eqity ratio), stock holds proportion of institutions and performance (indicated by DEA efficiency value). Furthermore, the company size, quantity of automation devices, risk of bank industry, degree of market concentration etc. could be the affecting variables. In other words, this study aims to explore whether capital structure, stock holds proportion of institutions and performance are interacting with one another and find out whether capital structure could be used for decision-making as well as the governance mechanism of stock ownership structure(stock holds proportion of institutions) to improve performance. The study objects are 26 of the current main banks in Taiwan excluding banks of financial holding companies, and the data of 201 samples are from the database of Taiwan Economic Journal (TEJ) during year 2001 to 2008. The research methodology is in the perspective of the Resource-Based Theory with Path Analysis and is divided into two parts. The first part made use of the Data Envelopment Analysis (DEA) to estimate the individual bank's management efficiency and the efficiency values computed by DEA were then used to find out whether each bank gained high management efficiency. The second part employed the Least Square method for three regression equations.As a whole, suppose that a bank posesses an appropriate capital structure and a suitable stock holds proportion of institutions, it would result in high value of DEA and optimally utilize its internal resources. The statistical results were consistent to what the Resource-Based theory implies. The findings are as follows.There is great difference among the technical efficiency values of the banks in Taiwan and the difference of performance becomes larger over time. Moreover, from the modeling of Data Envelopment Analysis, there should be improvement in company size and overall technical efficiency for the banks in Taiwan to increase their management efficiency.The results of the three regressions by the Least Square method can be briefly summarized as follows:For empirical results of regression 1:(1) Bank's debit-equity ratio negatively and significantly affects performance. (2) The share-holding ratio of corporative institutions positively but non-significantly affects bank's performance. (3) Company size positively and significantly affects bank's performance. (4) The number of automation devices positively and significantly affected bank's performance.For empirical results of regression 2:(1) Bank's performance negatively and non-significantly affected its capital structure. (2) The ownership structure (share-holding ratio of corporative institutions) was negatively and significantly associated with bank's capital structure. (3) Company size positively and significantly affected bank's capital structure. (4) The degree of market concentration negatively and significantly affected bank's capital structure.For empirical results of regression 3:(1) Bank's performance positively but non-significantly affected bank's ownership structure. (2) Bank's capital structure is positively but non-significantly associated with bank's ownership structure. (3) Bank's cooperate scale negatively but non-significantly affected bank's ownership structure. (4) Bank's risk is negatively and significantly associated with bank's ownership structure.