Financial Reform, Ownership and Performance in Banking Industry: The Case of Bangladesh

Bangladesh entered into the era of financial reform during the early 1980s. Most of the reforms initiated by the government have concentrated predominantly on the banking sector. Consequently, many changes relating to ownership, market concentration, regulatory measures and policies have taken place primarily to enhancing bank performance. In this regard, this study is undertaken to investigate the performance of commercial banks after the implementation of significant financial reform. Data Envelopment Analysis based frontier measures income and cost efficiency and traditional non-frontier measures non-performing loans and return on assets have been used for assessing bank performance. The findings indicate that income and cost efficiency of sample banks have increased by 37.84 percent and 15.28 percent respectively in 2008 compared to 2001. Similarly, non-performing loans and return on assets also report improvement in bank performance. The results generated by regression models indicate that foreign ownership has a statistically significant positive impact on bank performance. On the other hand, private ownership has favorable impact on income efficiency, return on assets, and non-performing loans, whereas negative impact on cost efficiency.