This study sought to suggest an efficient direction for government policy on the Korean financial industry by testing for synergy effects associated with the adoption of universal banking in Korean financial institutions, in preparation for financial liberalization and deregulation, through three empirical analyses. First, economies of scope in business domains for commercial banks and large securities firms were measured using Iterative Seemingly Unrelated Regression Estimation (ISURE) through Translog cost function estimation. According to the results, Korean commercial banks and large securities firms exhibited increasing returns to scale, indicating that economies of scope exist from the expansion of business domains. Second, synergy effects were examined using cases of M&A attempts by listed financial institutions targeting other financial institutions in the Korean stock market. Analysis of cumulative average abnormal returns showed that cumulative abnormal returns could be earned around the time of merger announcements. This suggests that corporate value is being created through M&A, indicating the occurrence of synergy effects. Third, a simulation analysis was conducted to examine the changes in profitability and productivity of financial institutions resulting from universal banking. Four models were constructed assuming various mergers among three companies—Kookmin Bank, Shinyoung Securities, and Daehan Investment Trust—and both static and dynamic analyses were performed. The results showed that, when synergy effects were assumed to exist, the merger of all three companies (Kookmin Bank, Shinyoung Securities, and Daehan Investment Trust) scored overwhelmingly highest, followed by the merger of Kookmin Bank with Daehan Investment Trust. When no synergy effects were assumed, the merger of Kookmin Bank with Daehan Investment Trust scored highest, followed by the merger of all three companies. Based on these three analyses, it appears that Korea should also actively consider transitioning to a universal banking system.