Abstract:
Despite worldwide movement towards privatization of financial intermediaries and
liberalization of financial markets, there is no straightforward empirical evidence to suggest
that private ownership is better. Owing to many practical reasons, state-owned banks can still
outperform their private counterparts, at least in certain dimensions. Despite substantial
structural changes and liberalization of the banking system less have been done in Sri Lanka
to analyze performance differences among various ownership groups. Based on data during
2000-2007, this study first, provides quantitative estimates on revenue-based performance
using Data Envelopment Analysis (DEA). Second, it evaluates the influence of ownership on
performance using regression techniques to show whether state-owned banks can outperform.
The study finds that state-owned banks can perform better than private banks in certain
aspects though they significantly lag behind foreign banks in terms of revenue efficiency.
Further, even though foreign banks remain efficient, in terms of country’s financial
development their contribution remains low.
