The Technical Inefficiency Effects of Turkish Banks After Financial Liberalization

Abstract

The banking sector in Turkey has grown significantly over the last two decades of financial liberalization. One of the aims of the financial liberalization was to improve efficiency through restructuring programs including the privatization of state banks and the encouragement of mergers. In this paper we identify key factors determining the technical efficiency differentials among Turkish commercial banks in the pre-and post-liberalization periods, using the technical inefficiency effects model. We found that loan quality, size, ownership of the banks, and profitability have a positive and significant impact on the technical efficiencies of banks. The results warrant implementation of effective regulatory measures to improve the quality of the earning assets of commercial banks. Furthermore, steps by the government to encourage acquisitions or mergers for private banks and the privatization of state-owned banks seem to be consistent in improving the overall efficiency of commercial banking in Turkey.

Bank Ownership and Efficiency in Post-conflict Era: Evidence from Sri Lanka

“…This could be justified as the state-owned banks were able to improve their lending by expanding their branch networks more aggressively after the ending of the armed-conflict, with the government encouraging them to expand into conflict-affected areas. This finding for Sri Lanka is against the majority of the literature on banking efficiency which provides support for the higher efficiency of private banks relative to state-owned banks in other countries (Altunbas et al, 2001;Berger, 2007;Burki & Niazi, 2010;Demir et al, 2005;Fries & Taci, 2005). Therefore, this study has revealed higher average efficiency in state-owned banks relative to domestic private banks during a post-conflict economic expansion period.…”

“…The majority of the empirical literature has focused on changes in the efficiency level of banks based on ownership type and have highlighted that domestic private and foreign owned banks outperform state-owned banks (Altunbas et al, 2001;Berger, 2007;Burki & Niazi, 2010;Demir et al, 2005;Fries & Taci, 2005). However Gerschenkron (1962) justified government ownership in strategic economic sectors such as banking, emphasising the necessity of financial services for economic growth in the absence of private participation.…”

“…An expansion in economic activities with improvements in investor sentiments due to the establishment of long-lasting peace in the country 1 , getting access to agricultural land in rebel held areas and revival of livelihood activities in war affected areas provided the necessary ingredient for banking institutions to expand their services. Although the literature on banking efficiency shows how ownership structures of banks links with efficiency of the banking industry (Altunbas et al, 2001;Berger, 2007;Burki & Niazi, 2010;Das & Gosh, 2006;Demir et al, 2005;Fries & Taci, 2005;Ray & Das, 2010), too little attention has been paid to evaluating this relationship when the economy experiences a favourable economic shock such as post-conflict economic developments. Therefore the present study evaluates how the ownership type of banks matter in terms of efficiency when the economy moves into a higher growth path in a post-conflict era.…”

Efficiency and productivity of Turkish securities firms: 2011-2015

“…Whilst the Turkish banking sector has attracted interest from scholars (Demir, Mahmud, & Babuscu, 2005;Aysan & Ceyhan, 2008;Ihsan, 2007;Isik & Hassan, 2008;Fukuyama & Matousek, 2011) there has been comparatively little investigation of its securities industry (Aktas & Kargin, 2007;Bayyurt & Akın, 2014). This paper is one of the few studies in the literature related to the performance of securities firms.…”

Foreign Bank Penetration and the Domestic Banking System: Empirical Evidence from Turkey Based on the Var Approach

“…Although the performance of foreign and domestic banks was meticulously investigated by Isik -Hassan (2002), Yildirim (2002), Demir et al (2005), Ozkan-Gunay -Tektas (2006), Denizer et al (2007), Aysan -Ceyhan (2008), andFukuyama -Matousek (2011), the relationship, if exists, between banking performance and FBP has not been explored. Therefore, the objective of this paper is threefold: 1) to investigate the relationship between domestic bank assets and FBP; 2) to detect the relationship between domestic credit (DC) and FDP; and 3) to investigate the relationship between FBP and banking profitability.…”