Performance of Indian Banks - Does Ownership Matter?
12 Pages Posted: 15 Jun 2004
It has been argued since long time that private ownership of firms leads to better firm performance, since private ownership leads to better intra-firm allocation of resources. But it does not guarantee that privately owned firms would always perform better than public sector firms. For instance if firms are subjected to competitive forces, they would perform efficiently irrespective of the sector they belong to. In this paper we have divided the Indian banking industry into four sub-groups, viz., Public, new Private, Old Private, and Foreign and tried to study their performance in a panel data framework. The period of study is 1995 to 2001.
The result suggests that initially Private sector and Foreign banks were performing better but as the competition increased the Public sector has reduced the performance gap. Thus after 1999 neither competition nor ownership has any influence on banks performance. The evidence suggests that entry of Private and Foreign banks have increased the competition in the Indian banking sector.
Keywords: Banks, Ownership Structure, Performance
JEL Classification: G21, G32, P17
Suggested Citation: Suggested Citation