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The Lending Behavior of Investment and Development Banks in Turkiye: Evidence from Quantile Regression Approach

Author

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  • Fatih Kayhan

    (Kirklareli University, Faculty of Applied Sciences /Finance and Banking Department, Kirklareli, Turkiye)

  • Onur Özdemir

    (Istanbul Gelisim University, Faculty of Economics, Administrative and Social Sciences / Department of International Trade and Finance (English), Istanbul, Turkiye)

Abstract

The major aim of this paper is to analyze the extent to which the lending behavior of 14 investment and development banks in Turkiye is responsive to different quantiles of selected three core variables (i.e., (i) non-performing loans/total cash loans ratio (%), (ii) net profit/equity ratio (%), and (iii) liabilities/equity ratio (%)) for the period between 2005/January and 2020/December. The estimation of a change in the degree of lending behavior, proxied by total loans/total assets ratio (%), is stimulated through an endogenous model where different quantile regression models are performed to examine the miscellaneous relationship among the selected variables and to correct potential diagnostic problems stemming from the endogeneous regressors in the panel data analysis. The empirical results imply that there are two fundamental outputs produced in regression analyses: On the one hand, the lending behavior is affected only by the non performing loans/total cash loans ratio with a negative coefficient sign and the liabilities/equity ratio with a positive coefficient sign, mostly at the lowest quantiles. On the other hand, the highest quantiles showed that the coefficients of these variables are insignificant. In addition, the net profit/equity ratio is only significant with a negative coefficient sign in limited quantiles. This means that there is a mild heterogeneity of statistically significant variables across different quantiles where the lowest quartile of lending behavior of investment and development banks is not confronted with the higher level of financial activities.

Suggested Citation

  • Fatih Kayhan & Onur Özdemir, 2022. "The Lending Behavior of Investment and Development Banks in Turkiye: Evidence from Quantile Regression Approach," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-1), pages 239-267, June.
    • Handle: RePEc:ist:journl:v:72:y:2022:i:1:p:239-267
    DOI: 10.26650/ISTJECON2021-1070542
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    More about this item

    Keywords

    Investment and development banks; Lending behavior; Financial markets; Turkish economy; Quantile regression approach JEL Classification: E00 ; F31 ; G21 ; G24;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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