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Profitability effects of financial globalization in an emerging market banking industry: insights into Turkey

Author

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  • Ece C. Akdo?an

    (Çankaya University, Department of Banking and Finance, Mimar Sinan Cd. 4, 06790 Ankara, Turkey)

  • Ekin Ayºe Özºuca

    (Çankaya University, Department of Banking and Finance, Mimar Sinan Cd. 4, 06790 Ankara, Turkey)

Abstract

The massive financial liberalization followed by accelerating financial globalization leaded to significant structural changes in the financial sector. Since financial institutions play a dominant role in functioning of financial sector, especially in emerging markets where banking industries are generally among the most sensitive sectors to increased interconnectedness of financial markets, how financial globalization actually affects the efficiency of financial intermediation is a vital question. However, although there exists plenty of research focusing on financial integration, impacts of financial globalization is untouched. Hence, this study investigates the bank profitability effects of financial globalization through focusing on an emerging market, Turkey and searches for any potential differences that may prevail among banks with different ownership structures. The findings indicate that while the market based profitability measures improve with financial globalization, the accounting based measures deteriorate pinpointing to an over optimism in the market which in turn brings in mispricing problems. Besides, ownership structure is found to affect the market based measures where banks with domestic and private ownerships are found to benefit more. However, since no significant distinction could be detected among any of the ownership compositions for accounting based profitability measures, such misappraisals seem to foster the optimism in the market.

Suggested Citation

  • Ece C. Akdo?an & Ekin Ayºe Özºuca, 2019. "Profitability effects of financial globalization in an emerging market banking industry: insights into Turkey," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(1), pages 303-325.
    • Handle: RePEc:rfe:zbefri:v:37:y:2019:i:1:p:303-325
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    More about this item

    Keywords

    financial globalization; banking industry; market and accounting based profitability; ownership structure; emerging markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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