International Journal of Scientific and Research Publications, Volume 10, Issue 5, May 2020 349 ISSN 2250-3153 This publication is licensed under Creative Commons Attribution CC BY. http://dx.doi.org/10.29322/IJSRP.10.05.2020.p10141 www.ijsrp.org Service Quality and Financial Performance of Banks (A Meta-Analysis) Tafa Mosisa Ijara School of management studies, Punjabi University, Patiala, India Email: tafamosisa@yahoo.com DOI: 10.29322/IJSRP.10.05.2020.p10141 http://dx.doi.org/10.29322/IJSRP.10.05.2020.p10141 Abstract: This study reviews previous studies conducted on the relationship between service quality and financial performance in banking industry. Accordingly 40 studies were selected from several journals and websites using convenient selection method. The selected studies were coded, summarized and analyzed using descriptive statistics. The study result shows that service quality directly and indirectly (through mediation of customer satisfaction and customer loyalty) has positive and significant effect on the financial performance of the banks. Service quality has also positive and significant effect on the mediators’ customer satisfaction and customer loyalty. This means improvement in service directly drives increase in profitability and also increases customer satisfaction and customer loyalty, then indirectly drives increase in profitability of the banks. Customer satisfaction and customer loyalty positively and significantly affects financial performance of the banks. In general the result depicts positive relationship between service quality, customer satisfaction and financial performance of the banks. Index terms: Banks, financial, performance, Quality and Service 1. Introduction The service profit chain is based on the principle that profitability of a firm is the result of customer satisfaction and loyalty. This means customer satisfaction and loyalty is originates from the customer’s sense of value received and which hereafter depends on the productivity, capability, satisfaction and loyalty of employees. According to service profit chain model a customer’s sense of value is the result of perceived quality of service and the perceived quality of how that service is delivered relative to the total costs the customer is charged to get those service (Heskett et el., 1997). According to (Duncan and Elliot 2002, Yeung et al., 2002) the significant impact of service quality and the mediating role of customer satisfaction have got good attention from the researcher and service providers. Service quality and customer satisfaction are the well recognized predictors of business performance in the literature. Corporations and business organization have been given due attention to the service quality because of its direct relationship with customer satisfaction, customer retention, costs, and financial performance (Brown and Swarts, 1989). Customer satisfactions have the direct benefit of retaining loyal customer, which would be less expensive than attracting the new customer (Reichheld and Sasser, 1990). Moreover, full profit potential of each customer can only be achieved by enhancing the profitability of the existing customers, obtaining the new customers and maintaining the relationships (Karimi, Sajedinejad, and Hassannayebi, 2014). Today in global competitive markets, business organizations are trying to hold the customers by meeting their satisfaction and loyalty; so that the ultimate goal of the organizations is to succeed in achieving and retaining the customers repurchase intention and finally financial performance (Egblopeali and Aimin, 2011). Creating satisfaction and loyalty in customers is obtained as the result of superior service quality. The causes for the duration and continuation in function of financial institutions is their ability to provide the services in a desired, secure and proportional form that can lead to the customers’ satisfaction and loyalty by meeting their expectations and demands. One of the factors that can guarantee the banks duration is customer-orientation and regard to the customer satisfaction. Enhancement of the customer satisfaction level will cause to enhance the rate of profitability and raises the banks share in the competition market. Customers’ satisfaction is not enough and the banks mustn’t rely on the customers’ satisfaction, they must be promised that their satisfied customers are also loyal. As a result this will increase bank’s profitability in the long term. Ultimately service quality in the banks assessment of it through follow is not only the strategy rather having quality of superior service is exactly the distinction aspect between successful and inefficient banks (Khorshidi et el., 2014). Rapid structural and technological changes, economic uncertainties, more demanding customers, growing competition and market changes significantly change the banking environment all over the world. Therefore, in a highly competitive world the success of any business depends on its human resources and customers (Thakur, 2017). The empirical evidence indicates banks profitability is highly associated with the quality of services provided by them and satisfaction of customers. The profitability of the banks can be determined by several factors, where service quality is one of the most important