This paper analyses determinants of banking sector performance in Uzbekistan over the last two decades. In this purpose, it has been deeply studied that the relationship between the structure of bank ownership and bank performance. To test our hypothesis, we use the econometric cost frontier approach - measured the performance of banking sector in terms of efficiency, using Trans-Log Cost and Profit Function with panel analysis for 29 Uzbekistan’s banks over the period 2003-2017. This study has been carried out to show possible difference between state-owned banks and the other types of bank ownership (private, joint-stock and foreign owned banks) in Uzbekistan from the perspective of performance. Moreover, this paper discovered an interesting pattern on a substance effect of bank ownership to banking sector performance of Uzbekistan before and after the 2008s financial crisis. The result reveals that the structure of bank ownership is a key determinant for the banking sector performance in Uzbekistan and that it does matter before the 2008s financial crisis in the banking system. Furthermore, this study finds that bank capitalization and price policy are significant determinants for banking sector performance of Uzbekistan. More importantly, on average, state-owned banks operated more cost efficient and less profit efficient than other types of banks in Uzbekistan in the last decade. These are interesting findings, because the cost efficiency of the state-owned banks is consistent with the “development” theory (A. Gerschenkron, 1962), and the profit inefficiency of the state-owned banks is more likely connected with the “political” theory (La Porta et al., 2002). Furthermore, it has been concluded that there is a significant space for improving the overall performance of the banking sector through privatization of the state-owned banks by implementing good corporate governance practice in the banking system of Uzbekistan.
state-owned, joint stock, foreign and private banks, bank performance, determinants, bank ownership, corporate governance, cost efficiency and profit efficiency.