The Korean Economic Review
The Efficiency of Financial Holding Companies in Korea
Garam Ahn (KAIST College of Business), Frederick Dongchuhl Oh (KAIST College of Business) and Junghum Park (University of Essex)Year 2020Vol. 36No. 1
AbstractThis study uses data envelopment analysis to examine whether the government-driven policy of promoting the creation of financial holding companies enhances the productive efficiency of the Korean financial system. We find that financial holding company affiliation has no substantial effects on commercial banks, life insurance companies, and securities companies, regardless of whether or not the financial holding company is owned by the government. However, we find a positive association between the asset diversification of financial holding companies and the productive efficiencies of their affiliated commercial banks, indicating a possibility that financial holding companies can improve efficiency within creased diversification. Our results suggest that the Korean government’s policy of promoting the creation of financial holding companies should be reconsidered.