Between 1991 and 2010, studies related to banking performance have posited several antecedents to banking performance. Figure 7 displays the trend topics based on author keywords that appeared between 1972 and 2010. Studies in this period mainly focused on mergers and acquisitions, information technology and transition economies that emerged from universal banking deregulation and bank privatisation. The financial crisis during 2008–2009 drew the attention of scholars to evaluate the banking performance. Idiosyncratically, this phenomenon has been acknowledged by researchers from 2010 to 2015, focusing on the role of corporate governance in the performance of the banking industry, including compensation, risk management, determinants of stock returns, capital buffer, productivity. Idiosyncratically, a vast of studies were conducted on Chinese commercial banks and the effect on their economic growth.
In the recent period (2016–2021), diverse factors posited in the studies that dominantly present a significant interest from banking scholars. While studies earlier mainly focusing on efficiency and its contributing factors, recent periods extended research directions to multiple constituents. For example, how banks diversified their services and the role of human capital efficiency to the banking performance [37]. Bose et al. employed the effect of green banking on the performance that underpins the inclusion of the environmental sustainability approach by the banking industry [38]. Meanwhile, Bhattacharyya et al. showed the effect of CSR expenditures and financial inclusion on the performance that define the social sustainability indicator of the banks [39]. Repeatedly, the role and structure of the board, categorisation of deposits and loans, risk exposures (business cycle), macroeconomic factors were also acknowledged in recent banking performance studies [40,41,42,43]. Idiosyncratically, scholars recently focus the components of sustainability of the banking industry from economic, environmental and social aspects [44]. Furthermore, the effect of banking and its stability on economic growth has been broadly carried out in the recent period. Moreover, the development of studies was taken into account, which implies the contribution to the economic growth of particular regions. Based on the earlier and recent studies, it is precisely observed the diversification of research constituents in relation to bank performance studies. Earlier studies (up to 2015) mainly measured banking performance or efficiency based on accounting measurements, while recent studies started to include market measurements principally based on stock returns performance. On the other hand, the rise of Islamic banking and finance influenced academic researchers to compare the business models [45], banking efficiencies [46] between conventional and Islamic banks, and efficiency for Islamic banks [5].
Based on the review of impactful documents published from 1990 to 2010, two particular objectives were identified: the effect of the board of directors or ownership on the bank performance [47,48,49] and measurement of efficiency, including cost and profit efficiency [50,51,52]. These constituents extended during 2011–2020 by the inclusion of risk-taking management [53], CEO incentives [54], contributing factors including capital, banking crises on banking performance [42, 55,56,57]. Meanwhile, the Islamic banking system got crucial attention from academic researchers. Accordingly, several studies evaluated and compared efficiency between Islamic and conventional banks [45, 58, 59]. Nevertheless, the role of the banking industry in economic growth was included in the research constituents in the recent decade. For example, Xu, Santana and a few more scholars investigated the correlation between financial intermediation and economic growth [57, 60, 61]. In recent years, scholars extended the banking-related research constituents to diverse areas. The effect of human capital efficiency [37], green banking [38], CSR expenditures [39] and bank stability was included to measure banking performance. These extensions of research themes within banking performance studies posited a significant interest by academic researchers.
Apparently, almost all documents adopted the quantitative method in measuring banking performance research constituents. However, studies that measured banking efficiency mainly applied nonparametric analysis DEA [5, 51], while SFA was adopted by limited studies [37, 42, 43]. On the other hand, regression analysis was predominantly applied to investigate banking performance from 1990 to 2010 [49, 50]. In recent studies, academic researchers have vastly adopted GMM (generalised method of moments) to examine the contributing factors on banking performance [39, 42, 57, 60]. These methods are dominating the banking-related studies throughout the publication periods. Over the periods, scholars have developed DEA applications in several categories, such as bootstrap, networking. Meanwhile, GMM with different approach (dynamic and system) techniques exploited panel data primarily extracted from Bankscope, Datastream, annual reports etc.
Main findings
Earlier, banking inefficiencies were substantially observed low, negatively affecting profitability and marketability [50, 51]. This trend was continuously depicted in studies [52]. However, Berger et al. evidenced better efficiency for larger banks than smaller banks [50]. On the contrary, Seiford and Zhu posited an adverse effect of bank size on marketability [51]. More so, Rehman et al. found larger banks are less efficient than smaller banks [40]. Hence, Moudud-Ul-Huq posited diverse impacts of bank size and competition on performance [62]. So, banking size is deemed to have a substantial effect on the overall performance of banks. However, Adesina embellished that diversification of services and choices of management decisions on loans (nonperforming, debt issuances) [63, 64] and deposits [41] affect the banking performance [37]. Moreover, board structure affects banking performance [40, 65], while higher human capital efficiency enhances banking performance [37].
Generally, foreign-owned banks provide better service, greater profitability and are better efficient than local banks. This phenomenon was evidenced in several studies; for example, Bonin et al. and other scholars demonstrated that foreign-owned banks are more cost-efficient than other banks [48]. However, this trend did not exist for Islamic banks as local banks showed better efficiency than foreign peers [58] and more efficient than conventional [59]. Meanwhile, state-owned or government-owned commercial banks were less efficient and provided poorer services [48, 49, 52]. But these banks’ efficiency was higher than urban/rural banks during credit risk shock [41]. Nevertheless, banking efficiency and performance substantially depend on diversification of services, managerial adequacy, ownership, types and size.
Studies have evidenced financial development and thus the banking industry’s role in economic growth [60]. In the nineteenth century, the establishment of the savings bank demonstrated city growth in Prussia [66]. Potentially, banks provide investment capital to increase per capita GDP [43]. However, Haini documented a contrasting effect of banking development on economic growth through a push out of private investment due to high levels of the banking sector [67]. However, Stewart and Chowdhury proved that a stable banking sector lessens the negative impact of a crisis on GDP growth and provides economic resilience in both developed and developing countries. Overall, findings elaborated a crucial link between banking sector development and economic growth.
Future study suggestions
This study has recommended several scopes for future studies in the hybrid review, mainly through bibliometric findings and the structured review of impactful articles [11]. In other words, the recommendations for future studies are made by observing and analysing discussions on highly cited and recent cited documents. Overall findings and analyses raised several questions that need to be addressed for future studies.
Firstly, does the banking sector improve economic growth in the least developed countries? Prior studies mainly focused on developed and developing economies, but less attention was given to least developed countries. Secondly, vast studies investigated contributing factors of banking performance, while political instability has been ignored. Future studies might include political instability on the banking performance. Apart from it, nonperforming loans can be another addition to future studies, and even few studies documented it. Thirdly, how do banks perform during the pandemic crisis, for instance, COVID-19? The current pandemic crisis can be a significant factor in banking performance related to future studies, including efficiency, mortgages, loan recovery, deposits and business services. The studies can include consumer behaviour (due to restricted movements, safety measurements), green banking (online transaction and services), financial technologies (inclusion of nonbanking services) and the contribution or continuance of economic activities in the country during and after the pandemic crisis.
Significantly, prior studies have ignored the current trend of FinTech inclusion in banking performance. Fourthly, will FinTech takeover the banking services and diminish banks in the near future? Future studies may investigate the effect of FinTech applications on banking. More so, future studies may explore the banking industry’s barriers, challenges and threats due to FinTech growth. Fifthly, almost all studies employed quantitative analysis related to banking performance. Therefore, future studies may use qualitative methods to explore the opportunities and practices of banks and their performance. Sixthly, the majority of the studies either applied parametric or econometric techniques to investigate the bank performance. Recent developments in technologies and methods may provide easy and robust results in such related studies as using machine learning for data analysis and predicting banking efficiency and productivity determinants. Seventhly, past studies mostly followed the intermediation approach, which scarcely included production and operating approach measurement. Future studies may extend the efficiency analysis using productivity growth analysis. Further, the majority of the studies observed efficiency only. Future studies can include a productivity change index along with an efficiency analysis. Finally, GMM and regression were broadly applied to investigate the effect of antecedents of banking performance and link to economic growth. Future studies may adopt other advanced data analysis techniques such as partial least squares, structural equations and other econometric techniques.
