An Investigation into the Equivalency of Three Performance Dimensions: Evidence from Commercial Banks in Bangladesh

TL;DR

This study assesses whether three different performance metrics of Bangladeshi commercial banks—productivity, profitability, and stock return—are comparable over time, revealing mixed trends but overall equivalency in outcomes.

Contribution

It develops an empirical framework to test the comparability of different performance dimensions using growth rates and productivity indices.

Findings

Profitability declined over the period

Stock returns showed investors incurring losses

Modest productivity growth at the end of the period

Abstract

This study evaluated the three dimensions of performance of commercial banks in Bangladesh by analyzing the trend of the Malmquist Productivity Index (MPI) of the Total Factor Productivity (TFP), Return on Asset (ROA) and Total Stock Return (TSR) over the period 2011 to 2015. The study developed an empirical framework with the intention to examine the equivalency of three dimensions of performance. Since, the measures of performance are different, they cannot be tested in their original form; hence, the growth rate of each category of performance measures were estimated and tested to examine the comparability among them. Evaluation of profitability revealed a decreasing trend and evaluation of stock performance suggests that investors are incurring losses on their investment over the selected period. Evaluation of productivity indicates that productivity regress was recorded initially but at the end of the studied period a modest productivity growth was recorded. Finally, this study was able to ascertain the anticipated equivalency of outcome of the three dimensions of performance.