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DETERMINANTS OF KEY PERFORMANCE IND ICATORS (KPIS) OF PRIVATE SECTOR BANKS IN SRILANKA: AN APPLICATION OF EXPLORATORY FACTOR ANALYSIS

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Author(s): Balasundaram NIMALATHASAN

Journal: Annals of the Stefan cel Mare University of Suceava : Fascicle of the Faculty of Economics and Public Administration
ISSN 2066-575X

Volume: 9;
Issue: 2(10);
Start page: 9;
Date: 2009;
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Keywords: Key Performance Indicators | Banking | Measurement | Efficiency

ABSTRACT
An efficient banking system facilitates linkage between mobilization and use of resources, which accel eratesthe process of economic growth. It is a widely accepted belief that a banking system which relies on a wide array ofbanking products, is able to carry out this function because it increases the efficiency of a banking systems to a largeextent by offering a broader and flexible arrange of services to the benefits of both borrowers and investors.Meanwhile, there are no comprehensive and empirical researches in that field especially in banking sector.In an attempt to fill in this gap, the present s tudy is conducted determinants of key performance indicators(KPIs) of private sector banks in SriLanka with samples of hundred respondents in twelve branches in North andEastern Provinces. Data were collected through a five points Likert type summated ra ting scales of questionnaire fromstrongly disagree (1) to strongly agree (5) were adopted to identify indicators. Sophisticated statistical model as“Exploratory Factor Analysis” (EFA) has been used. The results show that eight factors extracted from the analysisthat together accounted 73.781% of the total variance. These factors were categorized as 1) Accident Ratio (AR); (2)Opportunity Succession Rate (OSR); (3) Cash Flow (CF); (4) Return on Capital Employed (ROCE); (5) CustomerSatisfaction Rate (CSR); (6) Overall Equipment Effectiveness (OEE); (7) Return on Investment (ROI); (8) InternalPromotion (IP).

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