| Abstract |
This paper uses data envelopment analysis (DEA) to examine whether the government-driven policy of promoting the creation of financial holding companies enhances the productive efficiency of the Korean financial system. We find that financial holding company affiliation has no substantial effects on commercial banks, life insurance companies, and securities companies, regardless of whether or not the financial holding company is owned by the government. However, we find a positive association between asset diversification of financial holding companies and the productive efficiencies of their affiliated commercial banks, which indicates a possibility that financial holding companies can improve efficiency with a greater diversification. Our results imply that the Korean government’s policy of promoting the creation of financial holding companies should be reconsidered. |