Impacts of e-banking on performance of banks in a developing economy: empirical evidence from Bangladesh

Abstract

E-banking has become one of the most popular methods of banking that has experienced a considerable expansion during the last few years. However, there is relative dearth of empirical studies examining the impact of e-banking on performance of banks. Though e-banking is gaining acceptance in Bangladesh, impact of e-banking on bank’s performance is yet to be established. This paper fills this gap. Using panel data of 13 banks over the period of 2003–2013, this study empirically investigated the impact of e-banking on the performance of Bangladeshi banks measured in terms of Return on Equity, Return on Assets and Net Interest Margin. Results from pooled ordinary least square analysis show that e-banking begins to contribute positively to banks’ Return on Equity with a time lag of two years while a negative impact was found in first year of adoption. Empirical findings of this study is of greater significance for the developing countries like Bangladesh because it will invoke the attention of the bank management and policy makers to pursue such policies to expand e-banking. This study also contributes to empirical literatures by reconfirming (or otherwise) findings of previous studies.

Keywords:

• e-banking
• return on equity
• return on asset
• net interest margin
• pooled regression analysis
• Bangladesh

JEL Classifications:

• G21
• L25
• O31
• L86

Additional information

Notes on contributors

Md. Nur Alam Siddik

Md. Nur Alam SIDDIK received the PhD in Finance from Dongbei University of Finance and Economics, Dalian, China. He is an Assistant Professor in the Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh. His current research interests include, electronic banking and economic growth, performance analysis of banks, mobile banking and financial inclusion, bank led financial inclusion.

Gang Sun

Gang SUN received the MS in Finance and Banking from Jilin University, China, and PhD in Finance from the same University. He was a Senior Fulbright Visiting Scholar in University of Washington. Currently, he is a Full Professor in the School of Finance, Dongbei University of Finance and Economics, Dalian, China. His current research interests include financial inclusion, mobile banking and economic developments, internet banking, modern economics and banking issues.

Sajal Kabiraj

Sajal KABIRAJ is Full Professor of Strategy & International Business with Dongbei University of Finance and Economics, Dalian, China. He is recipient of Best Teacher Awards in 2008 & 2011 for teaching and research excellence. He has taught at postgraduate level in universities in Sweden, Austria, Malaysia, Canada, UAE, China and India. His current research interests include e-banking, information technology, technology adoption, and trust.

Joghee Shanmugan

Joghee SHANMUGAN is Associate Professor with Skyline University College, Sharjah, UAE. His current research interests include adoption, consumer behaviour, diffusion of innovation, e-banking, and satisfaction.

Cui Yanjuan

Cui YANJUAN received her PhD from Dongbei University of Finance and Economics, China. She is an Associate Professor at Dalian Polytechnic University, China. Her research interests include financial inclusion, online banking, microfinance, financial development and international economics.