Service Quality and Financial Performance of Selected Banks in Nigeria (2006-2013).
ABSTRACT
This work examined the relationship between investments in service quality programmes by banks on their financial performance as well as the relationship between service quality delivery and the choice of banks and repeat purchase decisions by bank customers.
The aim being to enhance Nigerian banks image in the global financial market. Banks in Nigeria continuously declare huge annual profits despite the fact that there has been seemingly increasing cases of complaints about the quality of services these banks render to their customers.
This study investigated causality between investments in service quality programmes and the financial performance of Nigerian banks. Survey approach was used in obtaining the primary data and panel data for the secondary data. The use of cointegration method enabled the estimation of relationships among the research variables.
Pearson Correlation and Regression methods of data analysis were employed to verify the relationship between investments in service quality programmes and financial performance of these banks using the SPSS Version 22 software package.
The aggregated results indicate that profitability of Nigerian banks is not a function of investments in service quality programmes and that choice of banks by customers is not a function of service quality experiences. However, there is a positive relationship between service quality and repeat purchase decisions.
Also, there is a positive but insignificant relationship between volume of deposits and investments in service quality; there is also a positive but insignificant relationship between investments in service quality programmes and the earnings of banks.
These findings clearly show the absence of a strong relationship between investments in service quality programmes and financial performance in the Nigerian banking sector. This is an indication that there has not been marked improvement in the provision of quality banking services that would draw the attention of customers.
Based on the findings, it was recommended that to be able to achieve patronage on the part of the customers in the increasing competitive banking business, banks should organize their operations according to the needs expressed (or in several cases even not expressed) by the customers so as to attract and maintain such customers.
There is the need to evaluate those service quality attributes that contribute to customer satisfaction and loyalty so as to explore the possibility of investing in such service quality programmes which can have the potential for impacting on profits of banks.
TABLE OF CONTENTS
TITLE PAGE i
DECLARATION – ii
CERTIFICATION – iii
ACKNOWLEDGEMENTS iv
DEDICATION vi
TABLE OF CONTENTS vii
LIST OF TABLES – xi
LIST OF FIGURES – xiv
ABSTRACT – xvi
CHAPTER ONE INTRODUCTION
- BACKGROUND TO THE STUDY – – – – – 1
- THE RESEARCH PROBLEM – – – – – 8
- RESEARCH QUESTIONS – – – – – – 10
- RESEARCH OBJECTIVES – – – – – – 11
- RESEARCH HYPOTHESES – – – – – – 11
- SIGNIFICANCE OF THE STUDY – – – – – 12
- SCOPE OF THE STUDY- – – – – – – 13
- LIMITATION OF THE STUDY – – – – – 14
- DEFINITION OF TERMS – – – 14
CHAPTER TWO REVIEW OF RELATED LITERATURE
- CONCEPTUAL FRAMEWORK – – – – – – 16
- Concept of Service – – – – – – – 16
- Banking Services – – – – – – – 18
- Concept of Quality – – – – – – – 20
- Concept of Service Quality – – – – – – 25
- IMPORTANCE OF THE SERVICE SECTOR – – – 33
- DIMENSIONS OF SERVICE QUALITY- – – – – 37
- RATIONALE FOR SERVICE QUALITY AWARENESS – – 40
- STEPS IN ACHIEVING SERVICE QUALITY – – – – 41
- MEASURING SERVICE QUALITY – – – – – 43
- SERVICE QUALITY MEASUREMENT IN BANK – – – 55
- SERVICE QUALITY AND BANKS SELECTION – – 58
2.10 SERVICOM 63
- MEASUREMENT OF BANKS’ PROFITS – – – – 66
- SERVICE QUALITY AND BUYING PATTERN – – – 69
- CONCEPT OF SATISFACTION – – – – – 71
- COMPOSITE MODEL OF SATISFACTION – – – 75
- BANKING SECTOR DEVELOPMENT IN OTHER COUNTRIES 77
- DEVELOPMENT IN THE NIGERIAN BANKING SECTOR – 80
- FINANCIAL SECTOR AND ECONOMIC DEVELOPMENT – 87
- SERVICE QUALITY AND THE NIGERIAN BANKING INDUSTRY 89
- FACTORS INFLUENCING BANK PROFITABILITY – – 90
- THEORETICAL FRAMEWORK – – – – – 101
- Service Profit Chain Theory – – – – – – 101
- Profitability Theories – – – – – – – 106
- SERVICE QUALITY AND BANK PROFITABILITY – – – 111
- SUMMARY OF LITERATURE REVIEWED – – – – 113
CHAPTER THREE RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN – – – – – – – 116
3.2 RESEARCH POPULATION – – – – – – 119
3.3 SAMPLE SIZE – — – – – – – – 120
3.4 SAMPLING TECHNIQUES – – – – – – 122
3.5 SOURCES OF DATA – — – – – – – 122
3.5.1 Primary Sources of Data – – – – – – 122
3.5.2 Design and Administration of Instrument – – – – 123
3.5.3 The Customers’ Questionnaires – – – – – 123
3.5.4 The Employees’ Questionnaire – – – – – – 124
3.5.5 Secondary Sources of Data – – – – – – 124
3.6 THE RESEARCH VARIABLES – – – – – 125
3.6.1 Measurement of Research Variables – – – – – 125
3.6.2 Structure of the Research Variables – – – – – 127
3.7 METHOD OF DATA ANALYSIS – – – – – 128
3. 8 TESTS OF INSTRUMENT – – – – – – 131
3.8.1 Tests of Reliability – – – – – – – 131
3.8.2 The Kaiser-Meyer-Olkin (KMO) and Bartlett’s Tests – – – 134
CHAPTER FOUR DATA PRESENTATION AND ANALYSIS
4.1 DATA PRESENTATION – – – – – – 141
4.1.1 Questionnaire Responses from Bank Customers – – – 141
4.1.2 Questionnaire Responses from Bank Staff – – – – 176
4.2 DATA ANALYSIS – – – – – – – 192
4.2.1 Test of Hypothesis I – – – – – – – 192
4.2.2 Test of Hypothesis II – – – – – – – 194
4.2.3 Test of Hypothesis III – – – – – – – 217
4.2.4 Test of Hypothesis IV – – – – – – – 219
4.2.5 Test of Hypothesis V – – – – – – – 221
4.3 DISCUSSION OF FINDINGS – – – – – – 222
4.3.1Hypothesis I – – – – – – – 222
4.3.2 Hypothesis II – – – – – – – – 223
4.3.3 Hypothesis III – – – – – – – 224
4.3.4 Hypothesis IV – – – – – – – – 224
4.3.5 Hypothesis V – – – – – – – – 225
CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS 227
5.2 CONCLUSION 228
- RECOMMENDATIONS – – 228
- SUGGESTIONS FOR FURTHER RESEARCH – – – – 230
- CONTRIBUTION TO KNOWLEDGE – – – – 231
REFERENCES 233
APPENDICES – 254
INTRODUCTION
1.1 Background of the Study
The service sector of the economy has increasingly assumed and is playing a major role in most economies of the world and citizens living in such economies are living in increasingly service-based economies.
As a result, the service sector plays a dominant role in creating value in such economies and by extension, the purchasing patterns of consumers and managerial decisions of the providers of these services, to a large extent, are influenced by activities of stakeholders in this sector.
Before the end of the twentieth century, agriculture was the prominent industry that contributed most to national income even in some of the developed countries.
This trend is being reversed as recent developments indicate that the agricultural sector contributes only about 2% of Gross Domestic Product (GDP) in the United States of America (Drucker, 2002), because the agrarian age paved way for the industrial age and the industrial age in recent times, has had its share of GDP reduced to roughly 15%.
On the contrary, there has been a dramatic surge in the growth of the service sector as pointed out by Auka (2012) who argued that the service sector accounted for 77% of total employment and 70% of GDP in the U.S.A.
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