Abstract:
This paper intends to review research on the performance of banks to identify gaps in the
current body of knowledge to justify future research directions. We use a systematic literature review
method and review 164 articles from refereed journals. Content analysis reveals that most of the
studies are empirical focusing on two aspects i.e. financial performance and efficiency of banks. These
studies consider the impact of particular events and contexts on performance and efficiency while
testing research hypotheses. However, often there is a lack of a theoretical backing for these studies.
We argue that the considered events and contexts affect the risk transformation process under the
financial intermediation theory. The efficiency of banks reflects the risk transformation process and
causes performance. On the other hand, traditional performance indicators were based on financial
measures that do not reflect the components of the risk transformation process. A sound
comprehensive risk-based composite measure is required to fill this gap.
