• Determinants of Bank Branch Activities: Evidence from the Taiwanese Banking Industry

Abstract

This is the first paper to discuss the determinants of banks’ branch activities. The sample consists of 45 banks in Taiwan for the period 2000–2005. In this study, a survey is first conducted to compare the patterns and strategies of banks’ branch activities. Second, a probit model is applied to investigate the factors in determining whether a bank increases (or decreases) the number of branches in geographic markets. Finally, the ordinary least squares methodology is used to examine the characteristics of banks’ branch activities. The empirical results show that in North Taiwan, banks not only continue to increase their branches but also adjust the location of their branches to reach the highest efficiency. However, in Central and Southern Taiwan, banks choose to buy existing banks to enter the market instantly. Most of the banks choose to adjust their branches in non-overlapping markets except for banks with midsized branch networks. Market specific factors are the critical factors when banks decide to increase (or decrease) the number of branches in the geographic markets. Bank-specific factors, bank performance factors, and corporate governance also have significant effects on the choice of branch activities. The analysis indicates that different factors affect different branch activity rates.

Keywords: Branch Activity, Geographic Market, Build, Divestiture, M&A