Performance Assessment between Taiwan and Korea TFT-LCD Panel Industry from a Risk and Return Perspective before and after Global Financial Crisis

Taiwan and Korea are in fierce competition in the TFT-LCD panel industry and together dominate over 70% of the international market share. Business strategies in Taiwan primarily rely on Original Equipment Manufacturers (OEMs) whereas Korea focuses principally on vertical integration, including development of its own international brand architecture. Additionally the financial structures of the manufacturers in both countries are different resulting in varied business models and financial risk exposures. The purpose of this research is to explore the performance efficiency in utilizing resources and performance variance before and after a global financial crisis based on influences upon the different business models and different financial structures. The Data Envelopment Analysis (DEA) was used to evaluate a company’s relative performance based on multiple parameters, to develop a matrix of risk and return and Malmquist Productivity Index to demonstrate their efficiency and technical productivity trend before and after the global financial crisis. The empirical results indicate: (1) Korea's manufacturers have a higher ratio of G&A expenses v.s. Taiwan’s manufacturers having a higher fixed asset ratio and debt ratio. The revenue of companies in both countries had been significantly affected by global financial crisis. (2) Company’s performance is consistent with the economic trends and high-risk firms have been hit harder by the phenomenon of decline in the efficiency of performance. (3) Korea manufacturers during the period of 2004-2008 represent lower risk and higher return compared with Taiwan manufacturers. Outstanding performance manufacturers had provided direction for motivating Taiwan manufacturers towards vertical integration and to reduce their debt ratios. (4) There are different phenomenon that influence Taiwan and South Korea productivity improvement, and show overall industry improvement was mainly attributable to technological phenomenon.