Abstract
The South Asian Journal of Finance is an international open access and double-blind peer reviewed journal focusing on the areas of finance in South Asian region. It is published bi-annually (June and December).
Highlights
Survival and the progress of a banking system depends on the profit and the cost efficiencies of the banks
This study aims to explore the effect of nontraditional activities on bank efficiency in terms of profit and cost efficiency since most of the studies have not consider about these activities in measuring efficiency in banks
This study contributes to the existing literature by analyzing the effects of non-traditional activities on bank efficiency for the context of Sri Lanka by using both cobb-douglas and translog stochastic frontier forms
Summary
Survival and the progress of a banking system depends on the profit and the cost efficiencies of the banks. There is a theoretical debate regarding the impact of non-interest income on bank performance since existing literature is inconclusive in this aspect. Stiroh (2004) highlights that greater amount of income earns through nontraditional sources is adversely related with the performance in the Community Banks in U.S by using the data during the period 1984-2000. Coincide with this finding, Stiroh and Rumble (2006) highlight that the diversification benefits are not profitable than lending activities in financial holding companies in U.S by using the data during the period of 1997-2002.
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