Bank outreach and performance: evidence from banking efficiency in Sri Lanka

Authors

Bolanda Hewa Thilakaweera, University of WollongongFollow
Charles Harvie, University of WollongongFollow
Amir Arjomandi, University of WollongongFollow

RIS ID

108556

Publication Details

Thilakaweera, B., Harvie, C. & Arjomandi, A. (2016). Bank outreach and performance: evidence from banking efficiency in Sri Lanka. The International Conference of the Association of Korean Economic Studies (AKES) on Korea and the World Economy XV: 'New Economic Paradigm and Sustainable Development' (pp. 1-21). Association of Korean Economic Studies.

Link to publisher version (URL)

The International Conference of the Association of Korean Economic Studies (AKES) on Korea and the World Economy XV: 'New Economic Paradigm and Sustainable Development'

Abstract

This study evaluates the impact of geographical dispersion of bank branches and their growth on banking sector efficiency in Sri Lanka for the period 2006-2014. Deviating from conventional models used in literature this study employs double-bootstrap semi-parametric truncated regression models based on data envelopment analysis (DEA).Our empirical results show that bank efficiency is not significantly influenced by branch expansion and geographical dispersion in an environment of higher economic growth. This study concludes that a likely decline in bank efficiency with expansion in branch networks, as asserted in the mainstream literature, is not valid when there is a high demand for banking services in line with overall economic growth. Further, this study suggests that geographical dispersion of the banking sector can be used as a policy tool to achieve broad-based and inclusive growth for emerging and rapidly growing economies such as Sri Lanka.