Abstract: This paper adopts a two-stage data envelopment
analysis to explore the impacts of financial development and bank
operating scale on bank efficiencies. The sample comprises
unbalanced panel data of 32 Taiwanese listed domestic commercial
banks over the period 1998 to 2013. Empirical results show that pure
technical efficiency is positively related to financial development,
whereas the effect of financial development on scale efficiency is
insignificant. Enlargement of bank operating scale improves bank
efficiencies, but the efficiency gains are decreased gradually when the
scale increases. Increases in capital adequacy ratio and market power
of loans lead into a growth of bank efficiencies.