Financial Integration and Economies of Scope: A Cross-Industry Analysis of Bancassurance in Taiwan

Using unique bancassurance data from Taiwan, we examine whether banks improve their scope economies by engaging in bancassurance activities. We adopt an econometric approach to identify the relation between economies of scope and bancassurance. The empirical results show that higher involvement in b...

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Bibliographic Details
Published in:Journal of insurance issues 2008-10, Vol.31 (2), p.120-151
Main Authors: Chen, Lih Ru, Peng, Jin Lung, Wang, Jennifer L.
Format: Article
Language:English
Subjects:
Banking industry
Banks
Branch banking
Customers
Diseconomies
Econometrics
Economic costs
Economies of scope
Financial holding companies
Financial services
Hypotheses
Insurance agencies
Insurance industry
Insurance premiums
Insurance providers
Integration
Market shares
Regression analysis
Retail banking
Revenue
Studies
Subsidiaries
Universal banking
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Summary:Using unique bancassurance data from Taiwan, we examine whether banks improve their scope economies by engaging in bancassurance activities. We adopt an econometric approach to identify the relation between economies of scope and bancassurance. The empirical results show that higher involvement in bancassurance helps banks improve their cost scope economies but may also lead to revenue scope diseconomies. However, the overall results indicate that banks in Taiwan realized greater gains from cost scope economies than losses from revenue scope diseconomies by engaging in bancassurance activities. In particular, banks with higher levels of bancassurance premium income and subsidiaries of financial holding companies are more likely to realize cost scope economies. On the other hand, banks with more correspondent insurers, larger numbers of branches, greater numbers of customers, a more intensive product focus, and a higher proportion of invested assets are more likely to realize revenue scope economies.
ISSN:1531-6076
2332-4244