Turkish Banking Research Articles

Analysis of factors influencing banks' profitability using panel data models

The banking sector, as one of the fundamental pillars of the financial industry, being in a healthy condition is of paramount importance not only from an individual perspective but also for firms and governmental administrations. Banks support sustainable economic conditions in all economies by facilitating investments and channeling idle funds into the economy. In this study, the analysis of micro and macro-level variables affecting the return on assets and return on equity of 24 banks operating in the Turkish banking sector from 2016 to 2023 has been investigated using panel data models. According to the results obtained from the analysis, it was found that there is a positive and significant relationship between return on assets and capital adequacy ratio, a negative and significant relationship with non-performing loans, a positive and significant relationship with BIST100 (Borsa Istanbul 100 Index), and a negative and significant relationship with bond yields. Additionally, a negative and significant relationship was found between return on equity and non-performing loans, and a positive and significant relationship with the BIST100 index.

Investigating the Determinants of Herd Behavior: an Application of the Hwang–Salmon Method to the Turkish Banking Sector

Efficient financial markets are important for pricing assets at fair value. In an efficient market, investors are rational in the face of fast and accurate information flow, evaluate the information correctly, and reflect it in their pricing decisions. However, particularly in times of crisis and uncertainty, it is observed that some market participants hesitate in their decision-making processes, imitate the behavior of other individuals whom they consider reputable because they cannot rely on their own knowledge and experience, and try to follow the trend. This tendency, which is called herd behavior, destroys market efficiency and prevents correct price formation. Therefore, it is important to identify its determinants. The purpose of the study is analyzing the precense and determinants of herding behavior in the Turkish banking sector during the period 17.10.2017–10.11.2023. Herd behavior is identified using the Hwang–Salmon method, and logistic regression analysis and the Kruskal–Wallis test are applied to identify its determinants. The findings reveal that herding behavior is associated with the rise in risks and returns as well as the fall in interest rates and exchange rates.

HUMAN CAPITAL AND PROFITABILITY: CASE of TURKISH BANKING SECTOR

This study aims to examine the effect of human capital on profitability of Turkish banking sector by a panel data covering 2009.q1-2022.q4. Throughout this aim, a research model based on a dependent variable as return on equity is set up. The independent variable to be focused is the Human Capital Efficiency Coefficient -mostly considered as the most significant sub-coefficient of the Value-Added Intellectual Coefficient Methodology developed by Ante Pulic (2004)- to measure intellectual capital efficiency. Besides, three control variables are included in the model to proxy balance sheet structure, assets quality and liquidity. Levin-Lin-Chu (LLC), Im-Pesaran-Shin (IPS) and Augmented Dickey Fuller (ADF) Fisher panel unit root tests, and Pedroni (1999) panel co-integration test are conducted in the econometric analyses to test the stationarity and co-integration among the series. Long term co-integration coefficients are estimated by Fully Modified Ordinary Least Squares (FMOLS) methodology proposed by Pedroni (2000). The empirical findings indicate the existence of a statistically significant and positive relationship between human capital and profitability; and statistically significant and negative relationships among human capital and assets quality, and human capital and liquidity. Another finding is that there exists no statistically significant relationship between human capital and balance sheet structure.Levin-Lin-Chu (LLC), Im-Pesaran-Shin (IPS) and Augmented Dickey Fuller (ADF) Fisher panel unit root tests, and Pedroni (1999) panel co-integration test are conducted in the econometric analyses to test the stationarity and co-integration among the series. Long term co-integration coefficients are estimated by Fully Modified Ordinary Least Squares (FMOLS) methodology proposed by Pedroni (2000). The empirical findings indicate the existence of a statistically significant and positive relationship between human capital and profitability; and statistically significant and negative relationships among human capital and assets quality, and human capital and liquidity. Another finding is that there exists no statistically significant relationship between human capital and balance sheet structure.

A HOLISTIC APPROACH TO THE BANKING SECTOR: PERFORMANCE AND EFFICIENCY ANALYSIS OF TURKISH BANKS USING CoCoSo AND DEA METHODS

The banking sector is a vital component of global economies, playing a critical role in ensuring financial stability by gathering savings, providing credit, and facilitating various financial transactions. Banks not only support economic growth but also act as intermediaries between surplus and deficit units within the economy. Therefore, evaluating their financial performance and efficiency is crucial for understanding the overall health of the financial system. This study analyzes the financial performance and efficiency of the top 10 banks in Turkey, which are ranked by asset size, over a 10-year period from 2013 to 2022. Using the Combined Compromise Solution (CoCoSo) method, the study ranks these banks based on various financial criteria, such as capital adequacy, asset quality, liquidity, and profitability. CoCoSo is a multi-criteria decision-making method that allows for comprehensive performance analysis by considering multiple factors simultaneously. In addition to CoCoSo, Data Envelopment Analysis (DEA) is used to evaluate the efficiency of these banks in utilizing their resources to generate financial outputs. The study’s findings reveal that privatelyowned banks, particularly Akbank T.A.Ş., consistently rank at the top in terms of both financial performance and efficiency. Akbank’s strong performance is attributed to its effective resource utilization and strategic management decisions. State-owned banks, on the other hand, generally show lower financial performance, even though they exhibit high efficiency levels. This discrepancy suggests that public banks may be focusing on non-profit-driven projects that contribute to public welfare, which in turn affects their overall financial performance. Foreign-owned banks, such as Garanti Bankası and Denizbank, also demonstrate strong financial performance but show varying degrees of efficiency, with Denizbank being relatively less efficient in resource utilization. By employing both the CoCoSo and DEA methods, this study offers a unique dual-method approach that provides a comprehensive evaluation of the Turkish banking sector. The combination of these two methods allows for a more nuanced understanding of both financial performance and efficiency, offering valuable insights for policymakers, bank management, and researchers. The study not only highlights the strengths and weaknesses of individual banks but also underscores the importance of efficient resource management for sustaining competitive advantage in a highly dynamic banking environment. The results of this study can serve as a robust framework for future research on bank performance evaluation, especially in emerging markets. Moreover, the study’s methodology can be applied to other sectors or countries to provide cross-sectional and time-series analysis, contributing to the broader literature on financial performance and efficiency.

Financial Performance Measurement with MAIRCA Method: Application on Turkish Banking Sector

Financial Performance Measurement with MAIRCA Method: Application on Turkish Banking Sector

How does ownership structure affect the profitability of Turkish banks? A comparative analysis of determinants

How does ownership structure affect the profitability of Turkish banks? A comparative analysis of determinants

A Hybrid Multidimensional Performance Measurement Model Using the MSD-MPSI-RAWEC Model for Turkish Banks

Abstract The purpose of the paper is to analyze the multidimensional sustainability performance of deposit banks that operate in the Turkish banking industry. For this aim, the current research presents a novel hybrid decision-making model comprising of MSD, MPSI and RAWEC methodologies. In the developed decision-making model, the MSD and the MPSI objective weighting methods are utilized to assign significance weights to the criteria, while the RAWEC, a relatively new technique, is employed for banks' ranking. In order to check the robustness of the recommended model, various sensitivity and benchmark analyses were conducted. According to the findings of the study, the most important criterion in determining the sustainability performance of deposit banks is the total hours spent on employee training. Moreover, the most successful bank in terms of multidimensional sustainability is Garanti BBVA. Furthermore, sensitivity and comparison analyses prove that the integrated framework in this study is a powerful, reliable and useful decision tool that can be utilized in assessing the sustainability performance of banks. Besides, practical and managerial implications based on the findings of the applied decision-making tool are discussed.

Comparison of Consumer Ethics Perception of Islamic Banking Customers with Conventional Banking Customers of Turkey: A Study from Turkish Banking System

Abstract Objectives: This study compared consumer ethics perceptions between Islamic and Conventional Banking customers in Turkey and examined the relationship between risk and ethics in both groups. Methods: A survey was conducted with 419 banking customers (276 Conventional, 143 Islamic) between March 2023 and March 2024, using the Risk Perception Scale and Ethical Behaviour Scale, along with demographic and bank usage characteristics. Results: Results showed no significant difference in total risk perception levels between the two groups (p<0.05). Islamic Banking customers exhibited significantly higher levels of passive benefitting, active benefitting, and overall ethics (p<0.05). For Conventional Banking customers, risk perception was negatively correlated with passive benefitting (r=-0.175; p<0.01), active benefitting (r=-0.184; p<0.01), and total ethics perception (r=-0.192; p<0.01). Passive benefitting significantly impacted the risk perception of Conventional Banking customers (OR=-0.06; p<0.05). Among Islamic Banking customers, risk perception was positively correlated only with deceptive legal practices (r=0.170; p<0.05), which did not significantly affect their risk perception (p>0.05). Conclusion: Islamic Banking customers have a higher level of ethical perception and prioritize ethical issues more than Conventional Banking customers. While ethical perceptions significantly influence the risk perceptions of Conventional Banking customers, they do not affect the risk perceptions of Islamic Banking customers. Keywords: Islamic banking, Risk perception, Ethics.

Unravelling the Impact of COVID-19 on The Turkish Banking Sector: An Empirical Analysis

This study aims to examine the impact of COVID-19 on the Turkish Banking Index of the Istanbul Stock Exchange. Bayer-Hanch Cointegration Test, a Canonical Cointegrating Regression, and a Fully Modified Least Squares test were examined. Gold price, Repo, exchange rate, and the COVID-19 cases exhibit a long-run relationship with the banking index. During the pandemic, COVID-19 cases affected banks' performance in a negative way at the Istanbul Stock Exchange. No study in the literature has specifically examined the impact of COVID-19 on the Turkish Banking Index using the Bayer Hanch Co-integration strategy. Therefore, this study provides valuable insight into the literature.

Ageism and glass ceiling: barriers to advancement for women in Turkish banking

Ageism and glass ceiling: barriers to advancement for women in Turkish banking

Moderating role of big data usage in intellectual capital and innovation performance: evidence from Turkish banking sector

PurposeIn this study, the moderator effect of the use of big data by Turkish banks on the innovation performance of the intellectual capital components, human capital, structural capital, and relational capital is discussed.Design/methodology/approachIn the research, 618 survey data applied to bank employees and weighted according to population in seven regions were used. The data were analyzed through the structural equation model.FindingsAccording to the empirical results, intellectual capital components and big data usage explain 65% of the variance in innovation performance. It has been determined that the other two components of intellectual capital, except structural capital, have a statistically significant effect on innovation performance. According to the Standardized Regression Weights, one unit change in human capital affects innovation performance by 0.162, and one unit change in relational capital affects innovation performance by 0.244. In addition, a one-unit change in big data usage affects innovation performance by 0.480. It has been understood that the use of big data significantly affects the innovation performance of banks with a rate of 0.480.Research limitations/implicationsAlthough this study is important, it could have been done with senior managers instead of being based on a survey. Instead of a survey, it could have been done with a data set taken from banks' balance sheets and tables. Additionally, the use of big data has been considered as a moderator but can be reconsidered as a mediator or external construct. Moreover, this study was conducted on a sample of participants working in the developing Turkish commercial banking sector. Therefore, the results of the study can be done in different countries and at different development levels.Originality/valueThe study is one of the first studies to examine the moderating effect of intellectual capital by considering its subcomponents in a developing country. In addition, it is thought that the results will contribute to managers, policy makers and researchers who want to increase competition and market share in the sector, as well as filling the gap in the literature.

Empirical Analysis of Turkish Banking Sector Institutional and Macroeconomic Determinants of Risks

Empirical Analysis of Turkish Banking Sector Institutional and Macroeconomic Determinants of Risks

ANALYZING CORPORATE SUSTAINABILITY REPORTS WITH TOPSIS METHOD: EVIDENCE FROM BIST SUSTAINABILITY INDEX

In terms of businesses, the concept of sustainability is the sensitivity of a business that operates to make a profit to environmental and social issues. Sustainability in business activities and decision-making processes is expressed as taking into account environmental and social factors together with corporate governance principles. Therefore, in order to share sustainability information with stakeholders, businesses use integrated reports that include both financial and non-financial information together with sustainability reports as well as annual reports. Therefore, in this study, the activities of deposit, development and investment banks in the Sustainability Index of Borsa Istanbul between 2020 and 2022 are analyzed in terms of the three dimensions of corporate sustainability: environment, social and governance. Indicators related to environment, social and governance were determined to analyze sustainability performances. Information on the determined indicators was obtained from the annual reports, sustainability reports and integrated reports published by the enterprises and analyzed with the TOPSIS method. In addition, data on the indicators determined to analyze the economic situation of the enterprises in the specified period were obtained from the Turkish Banking Association.. Information on economic indicators was also analyzed using the TOPSIS method and it was also investigated whether there is a relationship between sustainability and economic indicators. As a result of the analysis, no statistically significant result was found between sustainability performance reports and economic indicators. In this context, as a result of the results obtained, suggestions were made for theoreticians and practitioners.

THE ROLE OF BANKING SYSTEM IN PROVINCIAL ECONOMIC DEVELOPMENT: A STUDY OF TURKIYE, FROM THE 70S TO THE 2000S

This research examines the relationship between banking activities and provincial economic development. In particular, the study offers insight on the nature of the regional economic development discrepancies in Turkiye. The study finds that, despite the trend towards decentralisation that takes place in regional economic policies, the banking system adopts centralisation policies. Using dynamic generalised method of moment (GMM) estimates, we evaluated a unique data set including 39 years of provincial demographic, socioeconomic, and financial factors in Turkey. The study demonstrates that the banking intermediation is detrimental to provincial development. The Turkish banking system’s hierarchical structure prevents financial intermediaries from fulfilling their role in fostering development. Consolidation and concentration strategies must be reassessed, since they tend to favour centralisation, which has been shown to be inefficient for regional convergence. The results also suggest that branch managers should be granted greater decision-making authority to make better use of locally produced information when approving or rejecting projects, which would eventually lead to a reduction in provincial disparities.

Monetary Policy Decisions’ Impacts on Bank Leverage and Liquidity Ratios in Türkiye

This study explores how banks in the Turkish banking system design their asset and equity structures in return for monetary policy changes. In this context, between the periods of 2010-2020, we estimate bank leverage and liquidity with multiple monetary policy indicators and by employing two econometric models of static and dynamic panels. According to the results, banks reply to monetary expansion by picking up their leverage ratios on the liability part. On the other hand, banks reply to monetary expansion by enhancing their liquidity positions on the asset part. Also, the originality of our empirical study comes from that; this is the first attempt to evaluate the effects of monetary policy changes simultaneously on both sides of bank balance sheets’ in Türkiye.

UNRAVELING THE NEXUS BETWEEN DIGITAL BANKING TRANSACTIONS AND BANK PROFITABILITY: INSIGHTS FROM TURKEY'S DEPOSIT BANKS

This study estimates the relationship between digital banking transactions and bank net profit through regression analysis using the data of deposit banks in Turkey between 2011 and 2021. The data from 11 Turkish banks are analyzed with the least squares method (OLS) in the Stata package program. For this purpose, the relationship between digital banking transactions and bank net profit is estimated by constructing three models. In the first model, online banking transactions have a positive effect on bank profitability. The number of internet banking customers, the number of Automated Teller Machine (ATM), and the number of Point of Sale (POS) are found to have a negative effect on net profit, but these coefficients are not statistically significant. In the second model, mobile banking transactions have a positive effect on bank net profit. ATM has a positive and statistically significant effect on bank net profit, while the number of POS has a negative coefficient on bank net profit, but this coefficient is not statistically significant. In the third and last model, the digital banking transactions have a positive effect on the net profit of the bank. ATM and POS numbers have a negative effect on bank net profit, but these coefficients are not statistically significant. In conclusion, both internet and mobile banking transactions have a positive effect on bank profits in Turkey. Digital banking transaction, which is a combination of internet and mobile banking transactions, is also found to have a positive effect on bank profits. Additionally, it has been revealed that internet banking services contribute more to bank profits than both mobile and digital banking services.

The Effects of IMF Financial Soundness Indicators of Turkish Commercial Banks on the Financial Development Index

The financial soundness of banks, which are the building blocks of the financial system, is an important indicator that reflects the effectiveness of the financial system. It can be stated that the financial development of countries with an effective financial system will be positively affected by this situation. The paper aims to evaluate the effects of IMF financial soundness indicators of the Turkish commercial banks which have an important share in the Turkish banks, on the financial development index of Türkiye. In this paper, an evaluation was made based on the IMF Financial development index and IMF financial soundness indicators. Panel data analysis was used and panel least squares model estimation was made within the analysis. In line with the findings, it has been determined that sensitivity to profitability, liquidity, and market risks of commercial banks negatively affect financial development while the capital adequacy and asset quality of commercial banks positively affect financial development.

CAMELS-DEA in assessing the role of major factors in achieving higher efficiency levels: evidence from Turkish banks

ABSTRACT This study investigates the efficiency of Turkish banks from 2010 to 2023 under unconventional central bank monetary policies, a departure from studies in developed economies using Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity (CAMELS) ratings. This study involves two stages. In the first stage, we calculate the efficiency scores of Turkish banks through a CAMELS ratings-based data envelopment analysis (CAMELS-DEA) model with two enhancements. Then, in the second stage, we conduct static and dynamic panel data analysis, relating these CAMELS-DEA efficiency estimates to factors and economy-wide variables thought to impact the banks’ efficiency levels, capturing cross-sectional variations across entities and mitigate potential endogeneity bias by incorporating lagged dependent variables as instruments. The study reveals a significant relationship between Turkish bank efficiency, size, and type, with public capital deposit banks as well as banks with the highest number of branches displaying superior performance. The results show that unemployment rate, government debt, exchange rate, and inflation rate have a meaningful impact on banking efficiency. Government debt and exchange rate have an inverse relationship with efficiency while the remaining variables are positively correlated. These findings underline the potential for rising inflation to trigger financial instability after abrupt and unforeseen inflation spikes.

The Effect of Non-Performing Loans on Sector Profitability in the Turkish Banking Sector

The main purpose of this study is to determine the impact of non-performing loans (NPLs) on profitability of banking industry in Turkiye. In this study, in order to examine the basic indicators of profitability, non-performing receivables and consumer credit cards, non-performing housing and vehicle loans, non-performing consumer loans, consumer loans, loans and credit cards, net profit-loss and non-performing loans were compiled to generate a data set for the period between 2004 and 2018. Due to the different integration levels of the series obtained, models based on the autoregressive distributed lag (ARDL) approach, which is one of the time series regression methods, were established to analyze. Then, the effect of non-performing receivables on the banking sector profitability was examined. The initial findings reveal that the increase in non-performing receivables significantly reduced the profit of the banking sector.

Analyzing Customer Sentiments and Trends in Turkish Mobile Banking Apps: A Text Mining Study

This study investigates customer satisfaction with mobile banking applications in Turkey through a comprehensive text mining analysis of user-generated reviews. Drawing from a large corpus of data across ten leading Turkish banks, including Ziraat Bank, İş Bank, Garanti BBVA, Akbank, Yapı Kredi Bank, Halkbank, Vakıfbank, DenizBank, QNB Finansbank, and Turkey Şekerbank, the alignment between user ratings and sentiments is explored to uncover the nuances of customer feedback. The dataset undergoes rigorous preprocessing, sentiment analysis, trend analysis, and Latent Dirichlet Allocation (LDA) topic modeling to identify prevailing themes and factors affecting user satisfaction. The methodology involves the classification of reviews into positive, negative, and neutral sentiments and the examination of trends over time to pinpoint periods of heightened dissatisfaction. The analysis is further augmented by the application of advanced machine learning algorithms, including Random Forest, Gradient Boosting Machine, and BERT, showcasing an accuracy range between 92% and 95% in sentiment classification. The results of the topic modeling are visualized through word clouds, providing a clear depiction of the dominant themes in user feedback. Trend analysis over time identifies critical periods where negative reviews surpass positive ones, often coinciding with app updates or changes in service features. The findings highlight the necessity for continuous improvement and testing of mobile banking applications to meet customer expectations effectively.