Journal of Applied Finance & Banking

Eco-Efficiency Dynamics in Financial Holding Companies: Evidence from Taiwan Using a Network DEA–DuPont Framework

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• Abstract

   

  In the era of sustainable finance and digital transformation, financial institutions are increasingly required to balance profitability with environmental responsibility. This study develops an integrated analytical framework to evaluate eco-efficiency by combining a two-stage Dynamic Network Data Envelopment Analysis (DDEA) model with DuPont financial decomposition. Using panel data from Taiwan’s financial holding companies over the period 2016–2020, the proposed model captures both intertemporal dynamics and internal production structures, linking economic performance with environmental outcomes. The first stage assesses economic efficiency using financial and human capital inputs to generate interest income, while the second stage evaluates environmental efficiency by incorporating undesirable outputs such as waste and greenhouse gas emissions. Empirical results reveal that improvements in return on equity are primarily driven by profitability and financial leverage rather than asset utilization efficiency. Furthermore, eco-efficiency demonstrates a non-linear but converging trend, while environmental efficiency exhibits increasing divergence across firms. These findings highlight a structural imbalance between financial and environmental performance, reflecting a sustainability paradox within the financial sector. The study contributes to the literature by integrating financial performance drivers with eco-efficiency measurement and offers practical implications for policymakers and managers seeking to promote sustainable financial systems.

   

  JEL classification numbers: G21, C67, Q56.

  Keywords: Eco-Efficiency, Dynamic Network DEA, DuPont Analysis, Financial Holding Companies.