Do Banks Respond Asymmetrically to the Global Crisis? Evidence From Turkey

This paper tests whether Turkish banks respond asymmetrically to the global crisis with respect to their ownership using bank-level data during 2002Q4-2013Q3 period and employing panel estimation techniques. The dependent variables are selected financial ratios on capital adequacy, asset quality, liquidity, profitability, balance sheet and income-expenditure structure. Main determinants are bank-specific control variables on overdue loans, overhead costs, FX open position and bank size as well as dummy variables for bank listing and bank age. Other determinants include GDP growth, inflation, exchange rate, policy rate and required reserves, which reflect the impact of macroeconomic conditions and the monetary policy on bank structure. Estimation results suggest that Turkish banks respond asymmetrically to the global crisis with respect to their ownership. This result can be attributed to structural, institutional and historical factors, which cause macroeconomic and policy-related explanatory variables to have uneven effects on banks before and after the global crisis. Meanwhile, the impacts of bank-specific determinants are also observed to be disproportionate across different ownership categories between the pre-crisis and the post-crisis periods. These findings highlight the importance of analyzing the Turkish banking sector by an ownership breakdown in order to detect the asymmetric response and the paper also emphasizes the need to perform the analysis by sub-periods to be able to capture the effect of the global crisis.