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The purpose of this paper is to examine the impact of merger and acquisition (M&As) of “second financial restructuring” (SFR) on the productivity growth of commercial banks in Taiwan.

The paper uses the Malmquist productivity change index to evaluate the changes from pre-SFR to SFR period and from pre-SFR to post-SFR period. In addition, the bootstrapping regression method is applied to examine the relationship of SFR policy and productivity change.

Merged banks have improved their productivity and scale efficiency after the M&As program of SFR. In addition, the greater productivity growth of merged banks than non-merged banks is attributed to small-sized and private-voluntary merged banks. Furthermore, the small-sized merged banks have greater productivity growth and scale efficiency improvement than the big-sized merged banks, and the government-mandatory merged banks have lower productivity growth than private-voluntary merged banks after the SFR.

This study has an academic implication for providing additional empirical evidence related to the impact of government M&As policy on bank productivity growth in the developing countries.

The findings on this paper have implications for financial reform policy and banking management on M&As activity, in particular, as they clarify the differential effects of big-sized vs small-sized and government-mandatory vs private-voluntary merged banks.

Understanding the impacts of financial reform is particularly important as the banking industry has become increasingly competitive. This paper contributes to this area by assessing the impact of the M&As policy of SFR on productivity growth and evaluating differential effects of M&As.