What affects bank risk-taking in Taiwan A profitability and marketability efficiency perspective

This study explores the determinants of risk-taking among banks in Taiwan from 2002 to 2019 by investigating the relationships among risk indicators, profitability, and marketability efficiency scores using multiple DEA models. The results reveal that the key variables of interest are the various bank efficiency scores, which are the only profitability efficiency scores that significantly contribute to reducing bank risks. Generally, more efficient banks can eliminate their risk-taking relative to less efficient banks. However, the super- and cost-efficiency results do not fully support this hypothesis. Marketability efficiency remains relatively low in Taiwan, suggesting that banks increase earnings per share (EPS) and market value through announcements of good news for investors and depositors, thereby enhancing banks' reputations and decreasing bank risk-taking.