Journal Article

The Nonparametric Risk-Adjusted Efficiency Measurement: An Application to Taiwan's Major Rural Financial Intermediaries

Ching-Cheng Chang

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 4, pages 902-913
Published in print November 1999 | ISSN: 0002-9092
Published online November 1999 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244333
The Nonparametric Risk-Adjusted Efficiency Measurement: An Application to Taiwan's Major Rural Financial Intermediaries

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In this article, a nonparametric approach is used to incorporate risk into the measurement of technical efficiencies of the major financial intermediaries in rural Taiwan. Risk is treated as a joint but undesirable output given the fact that various regulatory actions may prevent its free disposability. Three risk indicators (nonperforming loans, allowance for loan losses, and risky assets) are employed alternatively in the empirical work. Results suggest that all three risk constraints are binding. Regulations on controlling risky assets and loan loss reserves are effective but more burdensome than those on controlling loan quality.

Keywords: disposability; efficiency; nonparametric approach; regulatory effect; risk; O160; O180; Q140

Journal Article.  0 words. 

Subjects: Agricultural Economics ; Economic Development

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