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Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banks

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  • Canan Yildirim

Abstract

This paper analyses the efficiency performance of the Turkish banking sector between 1988 and 1999, a period characterized by increasing macroeconomic instability. The technical and scale efficiencies of Turkish commercial banks are measured with the use of nonparametric Data Envelopment Analysis. The empirical results suggest that over the sample period both pure technical and scale efficiency measures show a great variation and the sector did not achieve sustained efficiency gains. It is also reported that the sector suffers mainly from scale inefficiency and scale inefficiency, in turn, is due to decreasing returns to scale. There are also reported differences in the efficiency performance of commercial banks with different ownership status. In addition, the relationships between profitability, asset quality, size and the two definitions of efficiency are considered. Efficient banks are more profitable, and pure technical efficiency and scale inefficiency are positively related to size. The trend in the performance levels over the period suggests that macroeconomic conditions had a profound influence on the efficiency measures.

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  • Canan Yildirim, 2002. "Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banks," Applied Economics, Taylor & Francis Journals, vol. 34(18), pages 2289-2301.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:18:p:2289-2301
    DOI: 10.1080/00036840210140146
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    1. Kursat Aydogan, 1990. "An Investigation of Performance and Operational Efficiency in Turkish Banking Industry," Discussion Papers 9022, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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