Journal of Applied Finance & Banking

The Divergence of Long - and Short-run Effects of Manager’s Shareholding on Bank Efficiencies in Taiwan

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• Abstract

  This paper adopts a panel error-correction model to explore dynamic impact of manager’s shareholding on bank efficiencies by utilizing the pooled mean group. The sample comprises unbalanced panel data of 30 Taiwanese listed domestic commercial banks over the period 1998 to 2009. Empirical results show divergence of long- and short-run effects of manager’s shareholding on bank efficiencies. The effect of manager’s shareholding exerts a significantly positive effect on technical efficiency in the long run while coexisting with a negative short-run relationship. Conversely, increase in manager's shareholding leads to a reduction of scale efficiency in the long run whereas its short-run effect on scale efficiency is positive.