Market performance of publicly sponsored versus privately sponsored banking: Evidence from an emerging market

Historical, Taiwan has a mixture of the publicly sponsored and privately sponsored banking, but there has been little investigation of their market performances in the literature. This study seeks to fill the gap. We study the market performance of these two types of banking from three dimensions: liquidity, payoff to investors and price efficiency. Liquidity and price efficiency are related to asset pricing and price discovery. Investor payoff suggests which investors should trade certain stocks and raises questions as to market fairness. All three dimensions have important implications in finance. Our outcomes show there are pros and cons in these three dimensions for public-sponsored- and private-sponsored banking. Future directions for development should include both types and they should learn to embrace their advantages and avoid each other’s shortcomings.