Leverage Behavior of Turkish Banks: How Did They Escape The Global Crisis?
AbstractIn this paper, we attempt to explain how the Turkish financial system emerged from the global crisis with little or no damage by comparing it with the US. We focus on banks’ historical leverage ratios. The overall leverage ratio of the Turkish banking system is lower than the US especially after the 2001 crisis. Bank-level panel regressions using both annual and quarterly data covering 1994-2009 period reveal that similar to US banks, Turkish banks adjust leverage procyclically. That is, they increase (decrease) leverage when their balance sheets expand (contract). Although procyclical leverage could be destabilizing, we find that Turkish banks exhibit a quantitatively smaller degree of leverage growth compared to US. We also find that tight regulatory and supervisory reforms implemented in Turkey after the 2001 crisis significantly reduced leverage growth. This is in contrast with the financial deregulation trend in the US in the years before the global crisis.
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Bibliographic InfoArticle provided by Bilgesel Yayincilik in its journal İktisat İşletme ve Finans.
Volume (Year): 26 (2011)
Issue (Month): 307 ()
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Web page: http://iif.com.tr
Global Financial Crisis; Leverage; Turkish Banking System;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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