The Influence Of Cross-Strait Financial Opening To The Performance Of Taiwanese Offshore Banking Unit

Since the regulations of cross-strait banking policy have been loosen and encouraged by Taiwanese government, the financial activity between Taiwan and China is now becoming more and more prosperous. Offshore banking unit (OBU), in favor of the feature of tax-free and relative invisibility, always plays an important role in capital raising mechanism for Taiwanese enterprises. Along with the increasing cross-strait financial engagement, this research will mainly focus on the performance of OBU operation.The study is looking at the samples of 36 banks providing international financial in Taiwan. The period taken by the study is from 2010 to 2014. Intermediation approach is applied in this study to measure the efficiency of a bank. The chosen input variables are business interest expenses, non-interest expenses, net-wealth and the number of branches. On the other hand, the chosen output variables include interest revenue, loan, discounts, etc. Apply data envelopment analysis (DEA) module and Malmquist to acquire and compare each performance index of every different OBU.Empirical results are as the following. To begin with, the overall OBU performance does not have significant change during the five years. The presumed reason behind the cause is insufficient time for the policy to be fully effective. Also, the allocation of resources is an important factor in affecting the performance of international financial service provider’s branches. In slack variables analysis, it shows that it is not the non-interest expense of the input variable of international financial service provider’s branches needing improvement. As to prevent the waste of operational cost or to apply a strict company evaluation to avoid the occurrence of bad debt. Finally, to raise the inter-period productivity, offshore banking unit under financial system performs better than the ones under non-financial system. Megabank and TC bank represent the most superior units under financial system and non-financial system respectively.From what have been mentioned above, the article has come to the conclusion below. First of all, the authorities concerned in Taiwan should accelerate cross-strait cooperation while the other banks banks should grasp the business opportunities brought about by the branches in Mainland China to facilitate the development prospects. Moreover, every bank should take good control and configuration over the resources either to reduce waste of business interest expenses or to adopt more stringent credit policy in order to avoid bad debt expenses. Last but not least, based on the superposition effect of policy, maybe the follow researchers can put fermentation period of certain policy into consideration if putting emphasis on policies.