In this study, we adopt a stochastic cost frontier method to investigate the influence of off-balance sheet (OBS) activities on the cost efficiency of Taiwan's banks. We estimate and compare cost inefficiency with or without OBS outputs of 46 Taiwanese commercial banks during the period, 1998 through 2001. The conclusions of this empirical study are as follows. First, omitting off-balance sheet outputs in estimating the cost frontier function of banks results in an underestimation of bank efficiency by approximately 5 per cent. Second, large banks are associated with a higher cost efficiency and have an increased ability to develop OBS activities. This is consistent with Taiwan's regulatory policies, which focus on promoting efficiency in the banking industry of emerging markets. Banks with higher employee productivity are also more cost efficient. Finally, we observe evidence of economies of scale in both models with or without OBS specification in Taiwan's bank industry. Economies of scope between loans and OBS outputs are also observed.

This study uses the three-stage data envelopment analysis (DEA) model to explore the true managerial efficiency of the banking firms in Taiwan, Hong Kong, and Mainland China. The empirical results indicate that the environmental conditions have a significant impact on banking efficiency. When the country-specific situations are important factors in explaining efficiency difference, the common frontier estimates obtained by neglecting those factors can generate biased and overestimated inefficiency levels. With findings obtained from the slack variable analyses, the current study can provide inefficient banks with ways to reduce their input waste through the adjustment of input allocations. The findings also confirm the importance of the three-stage DEA and its applications in determining the true managerial efficiencies of banks. Without the three-stage DEA, the management could be misguided when making strategic decisions and conducting inappropriate resource allocation.

Purpose -This paper primarily uses statistical methods to establish financial early-warning models that make it possible to predict, in advance, the probability of a company experiencing financial distress. Design/methodology/approach -In its empirical analysis, this is the first study that attempts to use financial ratios and non-financial ratios as variables to analyze business groups, and the present study uses the (K-S tests), and (M-U tests) and logit regressions model. Findings -Financial ratio variables remain the primary variables for predicting corporate financial distress. Upon examining the predictor variables for corporate financial distress at one, two, and three years prior to distress, it was found that financial ratio variables were the main ones at one and two years prior to distress, while at three years prior to distress there was one financial ratio variable and two ownership structure variables that showed significant differences. Financial structure, solvency, profitability, and cash flow indicators are the principal financial ratio variables. Ratios of director and supervisor ownership stakes after pledging of shares differed significantly between financially distressed and non-distressed companies. Establishing independent directors and supervisors can lower the likelihood of financial distress. Research limitations/implications -As the time remaining before occurrence of financial distress grows shorter, test results show that the number of financial ratios with significant differences goes up. But the longer the time that remains before occurrence of financial distress, the more the financial ratios show non-significant differences. That is why a number of scholars hold that the longer the period under study, the less explanatory power it has. Originality/value -The mean contribution of this paper is that establishing independent directors and supervisors can lower the likelihood of financial distress. The paper is useful to researchers or practitioners who are focused on financial risk management and corporate governance implementation.

Based on data of listed companies on Taiwan Stock Exchange (TWSE) through 2001~2011, this paper examines whether board independence has effects on executive compensation and corporate performance. Existing studies lacked of considering self-selection of board independence in evaluating the effects of board independence on economic consequence. This may incur estimation bias because systematic factors determining firm's introducing independent director also have influences on economic consequence. While Heckman (1979)'s two-step estimation addressed selection duo to unobservables, this paper employs propensity score matching (PSM) from Rubin (1983, 1985a,b) to address sample selection duo to observables, and forms two groups of samples, namely, firms with independent director and firms without independent director but share similar characteristics with the former. Empirical evidence from regression estimation shows divergent outcomes under before-matching versus after-matching samples. Before matching, greater degree of board independence is associated with higher profitability and higher level of total and average executive compensation. After matching, outperformance as well as overpay on executive compensation of firm with greater board independence is vanished. After controlling selection bias duo to observables versus unobservables, our evidence concludes that greater board independence is uncorrelated with greater corporate performance and executive compensation overpay.