{"title":"Impact of Non-Interest Income on Bank Efficiency: Evidence from Sri Lanka","authors":"J. Weerasuriya, R. Rathnayake, P. Fernando","doi":"10.4038/sajf.v1i1.25","DOIUrl":null,"url":null,"abstract":"Purpose: To explore the impact of non-traditional activities on both the cost and profit efficiency of banks as the measures of banks’ performance for the context of Sri Lanka. Design/Methodology/Approach: This study has considered systemically important banks in Sri Lanka as the sample and a panel data set for the period 2009 to 2019 obtained from annual reports of the banks. Estimation of bank efficiency was based on Stochastic Frontier Analysis (SFA). The efficiency of banks estimated using Cobb-Douglas and Translog Frontier forms. Findings: The efficiency scores indicate that profit efficiency of banks have decreased due to the involvement in non-traditional activities while the cost efficiency of banks have increased due to the involvement in non-traditional activities. The analysis shows that technology development has a significant impact on profit inefficiency under both cobb-douglas and translog models, while ATM development has only a significant impact on cost inefficiency under translog model when banks engage in both traditional and non-traditional banking activities. Yet, both profit and cost inefficiency of banks does not influence due to the ownership status of banks under the both models. Originality: This study contributes to the extant literature by highlighting the impact of inclusion of non-interest income as the secondary source of banks’ income to the banks’ performance in terms of profit and cost efficiencies as existing literature is silent regarding in this aspect.","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"1 1","pages":""},"PeriodicalIF":0.6000,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"South Asian Journal of Macroeconomics and Public Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.4038/sajf.v1i1.25","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose: To explore the impact of non-traditional activities on both the cost and profit efficiency of banks as the measures of banks’ performance for the context of Sri Lanka. Design/Methodology/Approach: This study has considered systemically important banks in Sri Lanka as the sample and a panel data set for the period 2009 to 2019 obtained from annual reports of the banks. Estimation of bank efficiency was based on Stochastic Frontier Analysis (SFA). The efficiency of banks estimated using Cobb-Douglas and Translog Frontier forms. Findings: The efficiency scores indicate that profit efficiency of banks have decreased due to the involvement in non-traditional activities while the cost efficiency of banks have increased due to the involvement in non-traditional activities. The analysis shows that technology development has a significant impact on profit inefficiency under both cobb-douglas and translog models, while ATM development has only a significant impact on cost inefficiency under translog model when banks engage in both traditional and non-traditional banking activities. Yet, both profit and cost inefficiency of banks does not influence due to the ownership status of banks under the both models. Originality: This study contributes to the extant literature by highlighting the impact of inclusion of non-interest income as the secondary source of banks’ income to the banks’ performance in terms of profit and cost efficiencies as existing literature is silent regarding in this aspect.
期刊介绍:
The purpose of the Journal is to publish (in English language) peer-reviewed articles, reviews and scholarly comments on issues relating to contemporary global macroeconomics and public finance by which is understood: The Journal is for all professionals concerned with contemporary Macroeconomics and Public Finance and is a forum for all views on related subjects. The Editorial Board welcomes articles of current interest on research and application on the areas mentioned above. The Journal will be international in the sense that it seeks research papers from authors with an international reputation and articles that are of interest to an international audience. In pursuit of the above, the journal shall: a. draw on and include high quality work from the international community of scholars including those in the major countries of Asia, Europe, Asia Pacific, the United States, other parts of the Americas and elsewhere with due representation for considerations of the readership. The Journal shall include work representing the major areas of interest in contemporary research on Macroeconomics and Public Finance and on a wide range of issues covering macro- economics, tax and fiscal issues, banking and finance, international trade, labour economics, computational and mathematical methods, etc. The Journal would particularly engage papers on pure and applied economic theory and econometric methods. b. avoid bias in favour of the interests of particular schools or directions of research or particular political or narrow disciplinary objectives to the exclusion of others. c. ensure that articles are written in a terminology and style which makes them intelligible, not merely within the context of a particular discipline or abstract mode, but across the domain of relevant disciplines.